Need help with the following problem: please submit answer on excell

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Hello, need help with the following:

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Chp. 9

3.You have been assigned the task of estimating the expected returns for three different

stocks: QRS, TUV, and WXY. Your preliminary analysis has established the historical risk

premiums associated with three risk factors that could potentially be included in your calculations:

the excess return on a proxy for the market portfolio (MKT), and two variables

capturing general macroeconomic exposures (MACRO1 and MACRO2). These values are:

MKT = 7.5%, MACRO1 = 0.3%, and MACRO2 = 0.6%. You have also estimated the following

factor betas (i.e., loadings) for all three stocks with respect to each of these potential

risk factors:

FACTOR LOADING

StockMKTMACRO1MACRO2

QRS1.240.420.00

TUV0.910.540.23

WXY1.030.090.00

a. Calculate expected returns for the three stocks using just the MKT risk factor. Assume a

risk-free rate of 4.5%.

b.Calculate the expected returns for the three stocks using all three risk factors and the

same 4.5% risk-free rate.

c.Discuss the differences between the expected return estimates from the single-factor

model and those from the multifactor model. Which estimates are most likely to be

more useful in practice?

d.What sort of exposure might MACRO2 represent? Given the estimated factor betas, is it

really reasonable to consider it a common (i.e., systematic) risk factor?