Problem $12-1$ Factor Models

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 $4\mathrm{.}7$ percent and the interest rate is expected to be $4\mathrm{.}2$

percent. A stock has a beta of $2\mathrm{.}4$ on the percentage change in GNP and a beta of $-\mathrm{.}7$ on

the interest rate. If the expected rate of return on the stock is $10$ percent, what is the

revised expected return on the stock if GNP actually grows by $4\mathrm{.}3$ percent and the

interest rate is $4\mathrm{.}5$ percent? $($Do not round intermediate calculations and enter your

answer as a percent rounded to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$