A three factor APT model has the following factors and risk premiums:

Factors: Risk premiums:

1 Change in GNP 4%

2 Change in $ exchange rates -2%

3 Change in energy prices -1%

Calculate the expected rates of return on the following stocks, assuming the risk free rate to be 5.5%:

A) Company A: b₁ = 0.5, b₂ = -1.5, b₃ = 0.3

B) Company B: b₁ = 1.2, b₂ = 0, b₃ = -0.5

C) Company C: b₁ = 2, b₂ = 0.5, b₃ = -2