3. Consider the following multifactor model (APT) of security returns for a particular stock. Factor Factor Beta Factor Risk Premium Inflatiorn Industrial Production Oil Prices 1.2 0.5 0.3 6% 8% 3% (a) If T-bill currently offer a 6% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (b) Suppose that the market expected the values for the three macro factors given in column 1 below, but the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" becomes known. Factor Expected Rate of ChangeActual Rate of Change Inflation Industrial Production Oil Prices 5% 3% 2% 5% 6% 0%