Question: The table below provides factor risk sensitivities and factor risk premia for a three-factor model for a particular asset, where factor 1 is MP (the

The table below provides factor risk sensitivities and factor risk premia for a three-factor model for a particular asset, where factor 1 is MP (the growth rate in U.S. industrial production), factor 2 is UI (the difference between actual and expected inflation), and factor 3 is UPR (the unanticipated change in bond credit spread).

Risk Factor	Factor Sensitivity( b )	Risk Premium( l )
MP	1.76	0.0259
UI	0.8	0.0432
UPR	0.87	0.0149

Calculate the expected excess return for the asset.

a. 8.02 percent

b. 12.32 percent

c. 4.56 percent

d. 9.32 percent

e. 6.32 percent

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