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What are the expected returns of the two factors

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Consider a two-factor APT. Stock A has an expected return of 16.4%, a beta of 1.4 on factor 1 and a beta of 0.8 on factor 2. The risk premium on the factor 1 portfolio is 3%. The risk free rate of return is 6%. What are the expected returns of the two factors if no arbitrage opportunities exist?

Reference no: EM132079670

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