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Assume the following data for a stock: Risk-free rate = 2 percent; factor-1 beta = 1.1; factor-2 beta = 0.6; factor-3 beta = 1; factor-1

Assume the following data for a stock: Risk-free rate = 2 percent; factor-1 beta = 1.1; factor-2 beta = 0.6; factor-3 beta = 1; factor-1 risk premium = 6 percent; factor-2 risk premium = 3 percent; factor-3 risk premium = 4 percent. Calculate the expected rate of return on the stock using a three-factor APT model.

a.

12.4%
b.

10.50%
c.

14.4%
d.

9.60%

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