An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free rate is 3%, the expected return on the first factor (r₁) is 11%, and the expected return on the second factor (r₂) is 8%. If b_i1 = 0.6 and b_i2 = 0.9, what is Crisp's required return? Round your answer to two decimal places.

Characteristic Line and Security Market Line

You are given the following set of data:

		HISTORICAL RATES OF RETURN
Year		NYSE		Stock X
1		- 26.5%		- 18.0%
2		37.2		18.0
3		23.8		18.5
4		- 7.2		2.0
5		6.6		11.4
6		20.5		15.9
7		30.6		16.0

1. Use a spreadsheet (or a calculator with a linear regression function) to determine Stock X's beta coefficient. Round your answer to two decimal places. Beta =
2. Determine the arithmetic average rates of return for Stock X and the NYSE over the period given. Calculate the standard deviations of returns for both Stock X and the NYSE. Round your answers to two decimal places.

   		Stock X		NYSE
   Average return,		%		%
   Standard deviation,		%		%

3. Assume that the situation during Years 1 to 7 is expected to prevail in the future (i.e., , , and both _x and b_x in the future will equal their past values). Also assume that Stock X is in equilibrium - that is, it plots on the Security Market Line. What is the risk-free rate? Round your answer to two decimal places.