Question: Boris Excelcius developed a simple three factor model to explain the excess stock returns over the risk free rate. He will use unexpected GDP surprises,

Boris Excelcius developed a simple three factor model to explain the excess stock returns over the risk free rate. He will use unexpected GDP surprises, interest rate surprises and inflation surprises. His final model for Louis Albertson Gymnastics (LAG) stock has an alpha term equal to 0.5 and the factor betas for growth, interest rates and inflation 1.5,-1.0 and 0.25. The mean of the firm specific term ei =0. If the inflation, interest rates and growth surprises are +2.0%,-1.0%, and +2.0%, then the expected excess return for LAG stock will be

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