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Compute the expected rate of return

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Question: Assume that West Corp shares returns required in the market by investors are a function of two economic factors: S1 is 0.04 and S2 is 0.01, where risk-free rate is 7%. West shares have reaction coefficient to the factors, such that S1 = 1.3 and S2 = 0.90.

Compute the expected rate of return using the arbitrage pricing model.

Reference no: EM132747813

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