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Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Risk Premium 6% Factor Industrial production
Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Risk Premium 6% Factor Industrial production (I) Interest rates (R) Consumer confidence (C) 3% The return on a particular stock is generated according to the following equation: r= 13% + 1.31+0.8R+1.00C+e a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 3%. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Equilibrium rate of return % a-2. Is the stock over- or underpriced? Underpriced O Overpriced
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