Problem $8-14$ APT

Consider the following simplified APT model:

FactorExpected Risk Premium $(\%)$Market$6\mathrm{.}5$Interest rate$0\mathrm{.}5$Yield spread$5\mathrm{.}1$

StockFactor Risk ExposuresMarket $($ b$1$b$1)$Interest Rate $($ b$2$b$2)$Yield Spread $($ b$3$b$3)$P$0\mathrm{.}71\mathrm{.}70\mathrm{.}4$P$2$raise to the power of $20\mathrm{.}700\mathrm{.}2$P$3$raise to the power of $30\mathrm{.}31\mathrm{.}80\mathrm{.}9$

Calculate the expected return for each of the stocks shown in the table above. Assume rf$=4\mathrm{.}4\%$rf$=4\mathrm{.}4\%.$

Note: Do not round intermediate calculations. Enter your answers as a percent rounded to $2$ decimal places. Problem $8-14$ APT

Consider the following simplified APT model:

Calculate the expected return for each of the stocks shown in the table above. Assume $\backslash ($ r$\_\{$f$\}=4\mathrm{.}4\backslash \%\backslash ).$

Note: Do not round intermediate calculations. Enter your answers as a percent rounded to $\backslash (\backslash$mathbf$\{2\}\backslash )$ decimal places.