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Suppose stock returns can be explained by the following three-factor model: R i = R F + 1 F 1 + 2 F 2 3

Suppose stock returns can be explained by the following three-factor model:

Ri = RF + 1F1 + 2F2 3F3

Assume there is no firm-specific risk. The information for each stock is presented here:

1 2 3
Stock A 1.45 .85 .10
Stock B .87 1.35 .30
Stock C .76 .26 1.19

The risk premiums for the factors are 5.3 percent, 4.1 percent, and 5.9 percent, respectively. You create a portfolio with 20 percent invested in Stock A, 20 percent invested in Stock B, and the remainder in Stock C. The risk-free rate is 3.2 percent.

What is the expression for the return on your portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

What is the expected return on your portfolio? (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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