An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 6%, the expected return on the first factor (r1) is 12%, and the expected return on the second factor (r2) is 8%. If bi1 = 0.7 and bi2 = 0.9, what is Crisp's required return?
Risk free rate=rf=6%
Expected return on factor 1=r1=12%
Expected return on factor ...
Solution describes the steps to calculate the required rate of return using two-factor APT model.