honeycfa

Given a three-factor arbitrage pricing theory APT model, what is the expected return on the Freedom Fund?> >

• The factor risk premiums to factors 1, 2, and 3 are 10%, 7% and 6%, respectively.> >
• The Freedom Fund has sensitivities to the factors 1, 2, and 3 of 1.0, 2.0 and 0.0, respectively.> >
• The risk-free rate is 6.0%.> >

A) 30.0%.

B) 33.0%.

C) 24.0%.

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The expected return on the Freedom Fund is 6% + (10.0%)(1.0) + (7.0%)(2.0) + (6.0%)(0.0) = 30.0%.