# Question

Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.5 percent. Information about those factors is presented in the following chart:

a. What is the systematic risk of the stock return?

b. The firm announced that its market share had unexpectedly increased from 23 percent to 27 percent. Investors know from past experience that the stock return will increase by .45 percent for every 1 percent increase in its market share.

What is the unsystematic risk of the stock?

c. What is the total return on this stock?

a. What is the systematic risk of the stock return?

b. The firm announced that its market share had unexpectedly increased from 23 percent to 27 percent. Investors know from past experience that the stock return will increase by .45 percent for every 1 percent increase in its market share.

What is the unsystematic risk of the stock?

c. What is the total return on this stock?

## Answer to relevant Questions

Suppose stock returns can be explained by the following three-factor model: Rt = RF + β1F1 + β2F2 – β3F3Assume there is no firm-specific risk. The information for each stock is presented here:The risk premiums for the ...Assume that the following market model adequately describes the return-generating behavior of risky assets: Rit = αi + βi RMt + εitHere: Rit = The return on the ith asset at Time t. RMt = The return on a portfolio ...Miller Manufacturing has a target debt–equity ratio of .55. Its cost of equity is 14 percent, and its cost of debt is 7 percent. If the tax rate is 35 percent, what is Miller’s WACC?The Saunders Investment Bank has the following financing outstanding. What is the WACC for the company? Debt: 60,000 bonds with a coupon rate of 6 percent and a current price quote of 109.5; the bonds have 20 years to ...A technical analysis tool that is sometimes used to predict market movements is an investor sentiment index. AAII, the American Association of Individual Investors, publishes an investor sentiment index based on a survey of ...Post your question

0