2. The return on Hendershott Hinge Company's stock is related to factors 1 and 2 as follows:...

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2. The return on Hendershott Hinge Company's stock is related to factors 1 and 2 as follows:

where .6 and 1.3 are sensitivity, or reaction, coefficients associated with each of the factors as defined in the chapter. If the risk-free rate is 7 percent, the A, risk premium is 6 percent, and A, is 3 percent, what is Hendershott's expected return?

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