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

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) 7 %
Interest rates (R) 3 %
Consumer confidence (C) 6 %

The return on a particular stock is generated according to the following equation:

r = 10% + 1.0I + 0.6R + 0.80C + 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.)

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