Question: You are using the multifactor model to estimate the expected return on Emerson Electric, and have derived the following estimates for the factor betas and

You are using the multifactor model to estimate the expected return on Emerson Electric, and have derived the following estimates for the factor betas and risk premiums:

Risk Premium Macroeconomic Factor Measure Beta (Rfactor – Rf)

Level of interest rates T-bond rate 0.5 1.8%

Term structure T-bond rate—T-bill rate 1.4 0.6%

Inflation rate Consumer price index 1.2 1.5%

Economic growth Gross national product growth rate 1.8 4.2%

With a riskless rate of 6%, estimate the expected return on Emerson Electric.

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