Suppose That We Have Identified Three Important Systematic Risk Factors $\beta$

question 13

Multiple Choice

Suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial production. In the beginning of the year, growth in these three factors is estimated at -1%, 2.5%, and 3.5% respectively. However, actual growth in these factors turns out to be 1%, -2%, and 2%. The factor betas are given by $\beta$ EX = 1.8, $\beta$ I = 0.7, and $\beta$ IP = 1.0. What would the stock's total return be if the actual growth in each of the factors was equal to growth expected? Assume no unexpected news on the patent. Assume expected return on the stock is 6%.

• A) 4%
• B) 5%
• C) 6%
• D) 7%
• E) 8%

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Definitions:

Egg Cell

The female gamete or reproductive cell involved in sexual reproduction, which when fertilized by a sperm, develops into a new organism.

Sperm Cell

A cell produced by the male reproductive system for the purpose of fertilization, carrying half of the genetic information required to form a new organism.

Behavior Genetics

The field of study that examines the role of genetic and environmental factors in shaping behaviors.

Genetic and Environmental Influences

The combined effects of biological/genetic predispositions and environmental factors in shaping an individual's traits and behaviors.