Last year the return on Harry Company stock was 5 percent. The portion of the return on the stock not explained by a two-factor macroeconomic factor model was 3 percent. Using the data given below, calculate Harry Company stock's expected return.
Macroeconomic Factor Model for Harry Company Stock

Transcribed Image Text:

Expected Value (%) Actual Value (%) Stock's Factor Variable Sensitivity Change in interest rate Growth in GDP 2.0 0.0 -1.5 2.0 4.0 1.0