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Business, 16.06.2020 19:57 BabyRage4900

Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. a. The APT is more general than the Capital Asset Pricing Model (CAPM).
b. The APT maintains that the realized return on any stock depends on changes unique to the firm.
c. The APT model maintains that the realized returns on stocks depend on unexpected changes in fundamental economic factors.
d. The APT identifies all relevant factors that affect the realized returns on stocks.

Imani, an analyst at Fantastique partners (FP), models the company's stock assuming that all stocks' returns depend on only three risk factors: inflation, industrial production, and the aggregate degree of risk aversion. The risk-free
rate is rRF= 5%, the return on the market is rt. 7%, and the rest of the available data is given in the following
table:

The required rate of return on an inflation portfolio, r1 8%
The required return on an industrial production portfolio, r2 12%
The required return on a risk-bearing portfolio, r3 5%
Factor sensitivity to the inflation portfolio, b1 –0.5
Factor sensitivity to the industrial production portfolio, b2 0.4
Factor sensitivity to the risk-bearing portfolio, b3 1.1
Fantastique Electric’s beta, bFE 2.0

Using the APT model, Imani calculates that FP's required rate of return is:
If Imani used the Capital Asset Pricing Model, she would have calculated that FP's required rate of return is:

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