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9 February, 20:39

Suppose Binder corporatio's common stock has a return of 17.61 percent. The risk-free rate is 3.68 percent, the market return is 12.4 percent and there is no unsystematic risk affecting Binder's return. Given the one-factor arbitrage pricing model, what is the factor beta

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  1. 9 February, 21:51
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    1.597

    Explanation:

    The computation of the factor beta using the one-factor arbitrage pricing model is shown below:

    As we know that

    = (Expected rate of return - risk-free rate of return) : (market rate of return-risk-free rate of return)

    = (17.61% - 3.68%) : (12.4% - 3.68%)

    = 1.597

    We simply applied the above formula to determine the factor beta and the same is to be considered
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