Suppose That We Have Identified Three Important Systematic Risk Factors

question 12

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 turn out to be 1%,-2%,and 2%.The factor betas are given by b_EX = 1.8,b_I = 0.7,and b_IP = 1.0.If the expected return on the equity is 6%,and no unexpected news concerning the equity surfaces,calculate the equity's total return.

• A)2.95%
• B)4.95%
• C)6.55%
• D)7.40%
• E)8.85%

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Definitions:

Experimental Tasks

Activities designed as part of a scientific experiment to measure participants' performance, abilities, or reactions under controlled conditions.

Eyewitness Memory

A narrative memory of a personally witnessed event.

Constructive Process

A cognitive function in which perception and memory are seen as dynamic systems that build and reconstruct information based on stimuli and prior knowledge.

Long-Term Memory

The component of memory responsible for storing information for extended periods, ranging from days to a lifetime.