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Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.6 percent. Information about

Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.6 percent. Information about those factors is presented in the following chart:

Factor Expected Value Actual Value
Growth in GNP 1.77 2.6% 3.1%
Inflation 1.37 4.8 5.3

a.

What is the systematic risk of the stock return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

b.

The firm announced that its market share had unexpectedly increased from 24 percent to 28 percent. Investors know from past experience that the stock return will increase by .70 percent for every 1 percent increase in its market share. What is the unsystematic risk of the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

c.

What is the total return on this stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

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