Suppose That We Have Identified Three Important Systematic Risk Factors

question 1

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 β_EX = 1.8,β_I = 0.7,and β_IP = 1.0. Calculate the stock's total return if the company announces that they had an industrial accident and the operating facilities will close down for some time thus resulting in a loss by the company of 7% in return.Assume expected return on the stock is 6%.

• A) -4.05%
• B) -2.05%
• C) 4.55%
• D) 0.40%
• E) 1.85%

---

Definitions:

Ruptured Follicle

A follicle that has released its egg during ovulation, sometimes referring to the process that leads to the formation of the corpus luteum.

Endocrine Structure

Refers to any organ or gland in the body that secretes hormones directly into the blood rather than through a duct.

Oviduct

A tube through which an ovum or egg passes from an ovary, also known as the fallopian tube in females.

Corpus Albicans

A regressed form of the corpus luteum, which is a temporary endocrine structure in female ovaries.