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Suppose the rates of return of a stock and the industrial price index are related by a single factor model. The following sample of monthly

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Suppose the rates of return of a stock and the industrial price index are related by a single factor model. The following sample of monthly data (in percentages) is available. Rate of return of stock 12% 10% 14% 8% Industrial price index 6% 4% 7% 3% 2.1 Determine the factor loading and interpret the value. 2.2 Determine the equation of the single factor model and represent the data and the equation graphically

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