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Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. 21 Factor Industrial production (I) Interest
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. 21 Factor Industrial production (I) Interest rates (R) Consumer confidence (C) Risk Premium 6% 43 5% The return on a particular stock is generated according to the following equation: r= 14% +1.21+ 0.6R+ 0.80 C+ e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 4%. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Equilibrium rate of return % a-2. Is the stock over- or underpriced? O Underpriced O Overpriced
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