Question: A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP

A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 3.8 percent, and the interest rate is expected to be 3.3 percent. A stock has a beta of 1.5 on the percentage change in GNP and a beta of .77 on the interest rate.

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