Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums.

Factor	Risk Premium
Industrial production (I)	8	%
Interest rates (R)	4	%
Consumer confidence (C)	7	%

The return on a particular stock is generated according to the following equation: r = 17% + 0.9I + 0.5R + 0.70C + 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.)

a-2. Is the stock over- or underpriced?

• Underpriced

• Overpriced