Learning objectives: Explain the arbitrage pricing theory (APT), describe its assumptions and compare the APT to the CAPM. Describe the inputs (including factor betas) to a multifactor model. Calculate the expected return of an asset using a single-factor and a multifactor model. Explain models...
Learning objectives: Explain modern portfolio theory and interpret the Markowitz efficient frontier. Understand the derivation and components of the CAPM. Describe the assumptions underlying the CAPM. Interpret the capital market line. Apply the CAPM in calculating the expected return on an...
Sorry if missed something, but why do you think that RF should be stated in the question? It could be derived from the equations?
Maybe irrelevant but I am afraid I am missing something methodologically important.
Thanks in advance
Hi @David Harper CFA FRM ,
I hope you are doing well.
I found a tricky question in other materials (than BT) and I found this question:
An analyst gathered the following data about three stocks:
Stock; Beta; Estimated Return
A; 1.5; 15.0%
B; 1.1; 15.7%
C; 0.6; 14.2%
If the risk-free rate is...
Learning objectives: Explain the lognormal property of stock prices, the distribution of rates of return, and the calculation of expected return. Compute the realized return and historical volatility of a stock. Describe the assumptions underlying the Black-Scholes-Merton option pricing model...