PLEASE EXPLAIN AND SHOW ALL FORMULAS USING EXCEL. THANK YOU!

10. 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 premia 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: NMKT = 7.5 percent, 2.MACRO1 = -0.3 percent, and MACRO2 0.6 percent. You have also estimated the following factor betas (loadings) for all three stocks with respect to each of these potential risk factors: Stock QRS TUV WXY Factor Loading MKT Macro1 1.24 -0.42 0.91 0.54 1.03 -0.09 Macrom2 0 0.23 0 a. Calculate expected returns for the three stocks using just the MKT risk factor. Assume a risk-free rate of 4.5 percent. Risk-Free Rate 0.045 2MKT 0.075 RETURN RFR+(BETA ERMKT) R(QRS) 13.80% R(TUV) 11.33% R(WXY) 12.23% b. Calculate the expected returns for the three stocks using all three risk factors and the same 4.5 percent risk-free rate. Risk-Free Rate 0.045 AMKT 0.075 MACRO1 -0.003 MACRO2 0.006 RETURN (BETA*ERMKT) RETURN (BETA*ERMACRO1) RETURN (BETA*ERMACRO2) R(QRS) 9.30% R(QRS) 0.13% R(QRS) 0.00% R(TUV) 6.83% R(TUV) -0.16% R(TUV) 0.14% R(WXY) 7.73% R(WXY) 0.03% R(WXY) 0.00% RETURN R(QRS) R(TUV) R(WXY) RFR+(BETA*ERMKT)+(BETA*ERMACRO1)+(BETA*ERMACRO2) 13.93% 11.30% 12.25% 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 (systematic) risk factor? 10. 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 premia 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: NMKT = 7.5 percent, 2.MACRO1 = -0.3 percent, and MACRO2 0.6 percent. You have also estimated the following factor betas (loadings) for all three stocks with respect to each of these potential risk factors: Stock QRS TUV WXY Factor Loading MKT Macro1 1.24 -0.42 0.91 0.54 1.03 -0.09 Macrom2 0 0.23 0 a. Calculate expected returns for the three stocks using just the MKT risk factor. Assume a risk-free rate of 4.5 percent. Risk-Free Rate 0.045 2MKT 0.075 RETURN RFR+(BETA ERMKT) R(QRS) 13.80% R(TUV) 11.33% R(WXY) 12.23% b. Calculate the expected returns for the three stocks using all three risk factors and the same 4.5 percent risk-free rate. Risk-Free Rate 0.045 AMKT 0.075 MACRO1 -0.003 MACRO2 0.006 RETURN (BETA*ERMKT) RETURN (BETA*ERMACRO1) RETURN (BETA*ERMACRO2) R(QRS) 9.30% R(QRS) 0.13% R(QRS) 0.00% R(TUV) 6.83% R(TUV) -0.16% R(TUV) 0.14% R(WXY) 7.73% R(WXY) 0.03% R(WXY) 0.00% RETURN R(QRS) R(TUV) R(WXY) RFR+(BETA*ERMKT)+(BETA*ERMACRO1)+(BETA*ERMACRO2) 13.93% 11.30% 12.25% 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 (systematic) risk factor