Question: Suppose that the expected return on the stock in the following table is 11 percent. Using a two factor model, calculate the stock's return if

Suppose that the on the stock in the following table is 11 percent. Using a two factor model, calculate the stock's return if the company specific surprise for the year is 3 percent.

Stock's Factor Sensitivity Actual Expected Variable Change in interest rate Value Value 0% .0% Growth in GDP 1.0% 4.0% 2.0

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