Suppose you had estimated following relationship for firm A's return as a function of the return on a market factor:

r_A = 0.03 + 1.3 r_M + e_A

(i) If the return on the market factor should fall by two percentage points, calculate the expected change in firm A's return?

(ii) What is the name given to the graphic representation of the preceding equation?

(iii) What might account for A's actual return being different from that expected on the basis of the first two terms of the equation?