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Category > Business & Finance Posted 15 Jul 2017 My Price 11.00

Suppose a three-factor model is appropriate to describe

Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart. Suppose this is the only information you have concerning the factors.

Factor

Beta of Factor

Expected Value

Actual Value

GNP

0.0042

$4,416

$4,480

Inflation

-1.40

3.1%

4.3%

Interest rate

-0.67

9.5%

11.8%

a. What is the systematic risk of the stock return?

b. Suppose unexpected bad news about the firm was announced that dampens the returns by 2.6 percentage points. What is the unsystematic risk of the stock return?

c. Suppose the expected return of the stock is 9.5 percent. What is the total return on this stock?

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Status NEW Posted 15 Jul 2017 09:07 AM My Price 11.00

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