Consider the following simplified APT model: Factor Market Interest rate Yield spread Expected Risk Premium...
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Consider the following simplified APT model: Factor Market Interest rate Yield spread Expected Risk Premium (2) 8.2 -0.4 5.3 Stock P p2 Market (bi) 1.8 1.2 Factor Risk Exposures Interest Rate Yield Spread (2) (63) -1.3 -0.6 0 0.9 0.9 1.0 p3 0.3 Consider a portfolio with equal investments in stocks P, P2, and p3. Assume rp=3%. a. What are the factor risk exposures for the portfolio? (A negative answer should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 3 decimal places.) Factor Risk Exposures Market (61) Interest rate (62) Yield spread (13) b. What is the portfolio's expected return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) Portfolio's expected return %
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