Google- Login - Saint Mar Co PIPOFM YouTube 99C Solved and Question 1 10 pts The expecte model on a specific stock is being modelled based on the following multifactor (Arbitrage Pricing Theory Factor Factor Beta Factor Risk Premium 496 0.8 0.2 7% Inflation Unemployment rate Industrial production 1.2 6.5% a) What is the expected return of this stock in the case where it is fairly priced? Assume a risk-free rate of 2%. (2 marks] b) If there were no surprises for the unemployment rate and industrial production but the announced inflation was 2% higher than expected, what is the stock's revised expected return? [3 marks] c) Explain the assumptions underlying the APT model. [5 marks) Edit View Insert Format Tools Table 12pt v Paragraph 2 08 *** Google- Login - Saint Mar Co PIPOFM YouTube 99C Solved and Question 1 10 pts The expecte model on a specific stock is being modelled based on the following multifactor (Arbitrage Pricing Theory Factor Factor Beta Factor Risk Premium 496 0.8 0.2 7% Inflation Unemployment rate Industrial production 1.2 6.5% a) What is the expected return of this stock in the case where it is fairly priced? Assume a risk-free rate of 2%. (2 marks] b) If there were no surprises for the unemployment rate and industrial production but the announced inflation was 2% higher than expected, what is the stock's revised expected return? [3 marks] c) Explain the assumptions underlying the APT model. [5 marks) Edit View Insert Format Tools Table 12pt v Paragraph 2 08 ***