Go Back   The Finance Forums > Finance forums > Homework



Homework Get help with your finance related homework.

Reply
 
Thread Tools
  #1  
Old 11-15-2010, 09:46 AM
Turloughmack Turloughmack is offline
Junior Member
 
Join Date: Nov 2010
Location: Donegla + Ireland
Posts: 2
Default Arbitrag Pricing Model

I have a question about Arbitrage Pricing Theory that I cannot solve or understand.

The formula I am using is

R(i) = (1 - b1 - b2)R(f) + b1(F1) + b2(F2)

The question I am asked says:

Explain how to make a risk-free return of 3.5% if R(i) = 4%.

I am confused by the wording of the question. I also have figures for the b1,b2,F1,F2 from the previous part of the question but I don't know if they are needed here. I will supply them anyway.

b1 = b2 = 1/4, R(f) = 1%, F1 = 2%, F3 = 3%
Reply With Quote

Old Sponsors
Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off



» Boards




All times are GMT -4. The time now is 06:52 PM.


Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.