11.3 Suppose a factor model is appropriate to describe the returns on a stock. Information about those

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11.3 Suppose a factor model is appropriate to describe the returns on a stock. Information about those factors is presented in the following chart.

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

b. The firm announced that its market share had unexpectedly increased from 23 percent to 27 percent. Investors know from their past experience that the stock return will increase by 0.36 percent per an increase of 1 percent in its market share. What is the unsystematic risk of the stock?

c. What is the total return on this stock?

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Corporate Finance

ISBN: 9780071229036

6th International Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe

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