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What would the equity total return be

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Question 1: Suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial production. In the beginning of the year, growth in these three factors is estimated at -1%, 2.5%, and 3.5% respectively. However, actual growth in these factors turn out to be 1%, -2%, and 2%. The factor betas are given by bEX = 1.8, bI = 0.7, and bIP = 1.0. The expected return on the risk free security is 6%. What would the equity's total return be if the actual growth in each of the facts was equal to growth expected?

Reference no: EM132604124

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