# Question: Suppose a three factor model is appropriate to describe the returns

Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart:

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

b. Suppose unexpected bad news about the firm was announced that causes the stock price to drop by 1.1 percent. If the expected return on the stock is 12.8 percent, what is the total return on this stock?

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

b. Suppose unexpected bad news about the firm was announced that causes the stock price to drop by 1.1 percent. If the expected return on the stock is 12.8 percent, what is the total return on this stock?

## Answer to relevant Questions

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 ...There are two stock markets, each driven by the same common force, F, with an expected value of zero and standard deviation of 10 percent. There are many securities in each market; thus, you can invest in as many stocks as ...For the firm in the previous problem, suppose the book value of the debt issue is $70 million. In addition, the company has a second debt issue on the market, a zero coupon bond with 12 years left to maturity; the book value ...Och, Inc., is considering a project that will result in initial aftertax cash savings of $3.5 million at the end of the first year, and these savings will grow at a rate of 4 percent per year indefinitely. The firm has a ...What would a technical analyst say about market efficiency?Post your question