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0. Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4. ...

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0. Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4. ...

0. Suppose the returns on Security A are linearly related to four risk factors: F1, F2, F3, and F4. The required rate of return on Security A can be determined as follows: E(RA) = a0 + b1F1 + b2F2 + b3F3 + b4F4. The risk-free rate is 4.5%. What is the required rate of return of Security A, where b1, b2, b3, and b4 are 0.4, 0.8, 0.6, and 0.7, respectively, and F1, F2, F3, and F4 are 5%, 6%, 10%, and 8%, respectively?

▸ 22.90%

▸ 20.60%

▸ 24.30%

▸ 18.40%

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Corporate Finance

Edition: 5^th

Author: Booth

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