Suppose that you have observed three important systematic risk factors given by exchange rate, inflation, and interest rate. At the beginning of the year, growth in these three factors is estimated to be -0.5%, 1.2%, and 2.0% respectively. However, actual growth in these factors turns out to be -1%, 2.0% and 1.5% respectively. The betas for the factors are ex=1.5, inflation=0.8, and interest =1.0. Calculate the equitys total return if the expected return on equity is 5% and the company announces that it has lost a major contract which will cause the company loss 2% in return.

Select one: a. 10.39% b. 7.39% c. 5.39% d. 2.39%