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  • Word Problems Unsolved 25052021 021911pm

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    Usama Raja
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    Crisp Trucking's required return is estimated using a two-factor APT model. The risk-free rate is 6%, the first factor premium is 9%, and the second factor premium is 6.5%. Crisp's sensitivity to the first factor is 0.7 and to the second factor is 0.9. Based on these factor sensitivities and risk premiums, Crisp's required return can be calculated.

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    Crisp Trucking's required return is estimated using a two-factor APT model. The risk-free rate is 6%, the first factor premium is 9%, and the second factor premium is 6.5%. Crisp's sensitivity to the first factor is 0.7 and to the second factor is 0.9. Based on these factor sensitivities and risk premiums, Crisp's required return can be calculated.

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    8 views3 pages

    Word Problems Unsolved 25052021 021911pm

    Uploaded by

    Usama Raja
    Crisp Trucking's required return is estimated using a two-factor APT model. The risk-free rate is 6%, the first factor premium is 9%, and the second factor premium is 6.5%. Crisp's sensitivity to the first factor is 0.7 and to the second factor is 0.9. Based on these factor sensitivities and risk premiums, Crisp's required return can be calculated.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    of 3

    An analyst has modeled the stock of Crisp Trucking using a two-factor APT model.

    The risk-free rate is 6%, the expected risk


    premium of first factor (Lamda- r1) is 9%, and the expected risk premium of the second factor (Lamda 2-r2) is 6.5%. If (b1-β_
    0.7 and (b2-β_𝑖2 = 0.9, what is Crisp’s required return?
    rate is 6%, the expected risk
    amda 2-r2) is 6.5%. If (b1-β_ 𝑖1=
    Two factors Two stocks

    Lamda 1 Inflation 0.01 b1 (x) 0.5 b1(y) 0.5


    Lamda 2 GNP 0.02 b2(x) 1.5 b2(y) 1.75
    Lamda 0 0-risk 0.03

    Stock X =Lamda 0 +(Lamda1*b1(x))+(Lamda2*b2(x))


    Stock Y =Lamda 0 +(Lamda1*b1(y))+(Lamda2*b2(y))

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