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Q1.Consider the multifactor model APT with two factors. Portfolio A has a beta of 1.20 on factor1 and a beta of 1.50 on factor 2. The risk premiums on the Factor 1 and Factor 2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 4%. If no arbitrage opportunities exist, what is the expected return on portfolio A?
Q2. Consider the single-factor APT. Stocks A and B have expected returns of 12% and 14%,respectively. The risk-free rate of return is 5%. Stock B has a beta of 1.2. If arbitrageopportunities are ruled out, what is the beta of stock A?
Q3. Answer questions about the following Fama-French three-factor regression for an investmentfund:Factor Loading Standard Error t-stat p.valueMarket (Rm-Rf) 1.06 0.021 50.088 0.000Size (SMS) 0.84 0.037 22.405 0.000value (HML) -0.27 0.03 -9.147 0.000Alpha (a) -13.62bps 0.001 -1.592 0.113Assume that the ???? 2 is 95.4%
Part (a) What kind of stocks does the fund invest in?Part (b) What fraction of this fund's return variation can be explained by the three factors?
Q4.What does each of the three forms of market efficiency postulate? (Please be concise!)
Q5.List all forms of market efficiency that the momentum anomaly violates.
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The Gergen Group's 5-year bonds yield 6.85%, and 5-year T-bonds yield 4.75%. The real risk-free rate is r* = 3.9%, the default risk premium for Gergen's bonds i
On 1 July 2018 BMW Ltd.Provide the journal entries at 1 July 2018 and 30 June 2019. Determine the issue price of the debenture.
Franklin Bedding, Inc. has assets of $400,000 and turns over its assets 1.5 times per year. Return on assets is 12 percent. What is its profit margin (return on sales)?
In its first year, its income showed a deficit of $7900. Determine What would the equity section of its balance sheet show at year end?
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