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Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Industrial production (I) Interest

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Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Industrial production (I) Interest rates (R) Consumer confidence (C) Risk Premium 88 41 61 The return on a particular stock is generated according to the following equation: r=16% +1.6/+0.8R+1.30C+ 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.) Answer is complete but not entirely correct. Equilibrium rate of return 39.8 % a-2. Is the stock over- or underpriced?

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