Consider a three-factor APT model. The factors and associated risk premiums are:

Factor Risk Premium (%) Change in gross national product (GNP) +5.9 Change in energy prices 0.8 Change in long-term interest rates +2.9

Calculate expected rates of return on the following stocks. The risk-free interest rate is 4.8%.

A stock whose return is uncorrelated with all three factors. (Enter your answer as a percent rounded to 1 decimal place.)

A stock with average exposure to each factor (i.e., with b = 1 for each). (Enter your answer as a percent rounded to 1 decimal place.)

A pure-play energy stock with high exposure to the energy factor (b = 2.3) but zero exposure to the other two factors. (Enter your answer as a percent rounded to 2 decimal places.)

An aluminum company stock with average sensitivity to changes in interest rates and GNP, but negative exposure of b = 1.8 to the energy factor. (The aluminum company is energy-intensive and suffers when energy prices rise.) (Enter your answer as a percent rounded to 2 decimal places.)

Please show the calculations. Thanks.

a a. % % b. . Expected rate of return Expected rate of return Expected rate of return Expected rate of return C. % d. %