Given a three-factor arbitrage pricing theory (APT) model, what is the expected return on the Premium Dividend Yield Fund?
- The factor risk premiums to factors 1, 2 and 3 are 8%, 12% and 5%, respectively.
- The fund has sensitivities to the factors 1, 2, and 3 of 2.0, 1.0 and 1.0, respectively.
- The risk-free rate is 3.0%.
A. 33.0%.
B. 50.0%.
C. 36.0%.
|
