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Suppose a three - factor model is appropriate to describe the returns of a stock. Information about the three factors is presented in the following
Suppose a threefactor model is appropriate to describe the returns of a stock. Information about the three factors is presented in the
following chart:
a What is the systematic risk component of the stock return? Do not round intermediate calculations. Round the answer to
decimal places.
Systematic risk portion
b Suppose unexpected bad news about the firm was announced that causes the stock price to drop by percent. If the expected
return on the stock is percent, what is the total return on this stock? Do not round intermediate calculations. Round the answer
to decimal places.
Total return
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