Question 1 (a) A factor model is appropriate to describe the returns on a stock. Following table are the information abo

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Question 1 A A Factor Model Is Appropriate To Describe The Returns On A Stock Following Table Are The Information Abo 1 (865.56 KiB) Viewed 18 times

Question 1 (a) A factor model is appropriate to describe the returns on a stock. Following table are the information about three factors Factor GDP Inflation Interest B -0.007521 -0.87 -0.35 Expected Value $14,500 2.5% 5.0% Actual Value $13,900 2.0% 4.4% Based on the information given, 1. Calculate the systematic risk of the stock return. ii. The firm announced that they have recently signed a memorandum of project with government. Therefore, the market share had unexpectedly increased from 20 percent to 25 percent Investors know from experience that the stock return will increase by 0.5 percent for every 1 percent increase in its market share. Calculate the unsystematic risk of the stock. ill. The expected return on the stock is 10.5 percent, calculate the total return on this stock (7 marks)