Question
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart: Factor
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart:
Factor | Expected Value | Actual Value | |||||
GDP | .0008621 | $14,236 | $14,222 | ||||
Inflation | .90 | 3.9% | 3.7% | ||||
Interest rates | .47 | 7.2% | 7.0% |
a. What is the systematic risk of the stock return? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign. Round your answer to 2 decimal places. (e.g., 32.16))
what is Systematic risk of the stock return ____%
b. Suppose unexpected bad news about the firm was announced that causes the stock price to drop by 1.3 percent. If the expected return on the stock is 13.9 percent, what is the total return on this stock? (Do not round intermediate calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Total return of the stock ______%
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