CA Final SFM Paper

I don't think that's correct, CAPM should not be confused with APT, basically APT is 'like' CAPM with more than 1 factor - there is a simple linear relationship. 

The APT states that if asset returns follow a factor structure then the following relation exists between expected returns and the factor sensitivities:

Rf is already given in the question and RP = Actual Value - Expected Value 

actually i am not sure about whether alpha need to added or not

if alpha is ignored than ans will be .95%

@ Dhruv hey RP1, 2 etc is like Rm in CAPM and not actual - expected

actual - exected is alpha 

DHRUV n others r right, i know the below

ER=PR+UPR

ans::ER=9.25+8.15*  =17.4

*UPR=sum of (beta*actual-expected)

CAPM is mainly based beta factor

n APM/APT is based other economic factors and beta.

in the above

PR is predicted return i.e Rf

UPR is unpredicted return i.e. to be calculated by using those economic factors vch r effecting return..

@  vins @ final 

YES YOU ARE RIGHT