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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
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) 6% 2 The return on a particular stock is generated according to the following equation: 15% 1.4/ + 0.7R + 0.90 C + e a-1. Find the equilibrium rate of return on this stock using the APT The T-bill rate is 7%. Do not round intermediate calculations. Omit the "%" sign in your response.) Equilibrium rate of return a-2. Is the stock over- or underpriced? Overpriced Underpriced
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