Problem $12-1$ Factor Models

A researcher has determined that a two$-$factor model is appropiate to determine the

return on a stock. The factors are the percentage change in GNP and an interest rate.

GNP is expected to grow by $4\mathrm{.}9$ percent and the interest rate is expected to be $4\mathrm{.}4$

percent. A stock has a beta of $2\mathrm{.}6$ on the percentage change in GNP and a beta of $-\mathrm{.}72$

on the interest rate. If the expected rate of return on the stock is $12$ percent, what is the

revised expected return on the stock if GNP actually grows by $4\mathrm{.}5$ percent and the

interest rate is $4\mathrm{.}7$ percent? $($Do not round intermediate calculations and enter your

answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Revised expected return