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Suppose that the market can be described by the following three sources of systematic risk...

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Finance

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) 8 %
Interest rates (R) 5 %
Consumer confidence (C) 7 %

The return on a particular stock is generated according to the following equation:

r = 19% + 0.7I + 0.4R + 0.60C + e

a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 8%. (Do not round intermediate calculations. Round your answer to 1 decimal place.)

Equilibrium rate of return ____%

a-2. Is the stock over- or underpriced?

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