Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums.
| Factor |
Risk Premium |
| Industrial production (I) |
7% |
| Interest rates (R) |
4 |
| Consumer confidence (C) |
6 |
The return on a particular stock is generated according to the following equation:
r = 15% + 1.1I + 0.6R + 0.90C + e
Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 7%. (Do not round intermediate calculations. Omit the "%" sign in your response.)
Equilibrium rate of return %