You are exploring the use of APT in making investment choices. You have identified three factors labelled F1, F2, and F3 with corresponding risk premia RP1 = 4%, RP2 = 5%, and RP3 = 2%. A stock with ticker ABC has historically shown returns which have followed the equation: rABC=0.12+.75F1+1.0F2+.5F3+eABC c. If the expected price next year will be $56, what is the fair price today, that is, the stock price now that will not allow for arbitrage profits?

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A: The question is related to Portfolio Management. The details are given.

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