The table below provides factor risk sensitivities and factor risk premia for a three-factor model for a particular asset, where factor 1 is MP (the growth rate in U.S. industrial production), factor 2 is UI (the difference between actual and expected inflation), and factor 3 is UPR (the unanticipated change in bond credit spread). Calculate the expected excess return for the asset.
A) 12.32 percent
B) 9.32 percent
C) 4.56 percent
D) 6.32 percent
E) 8.02 percent

Question

The table below provides factor risk sensitivities and factor risk premia for a three-factor model for a particular asset, where factor 1 is MP (the growth rate in U.S. industrial production), factor 2 is UI (the difference between actual and expected inflation), and factor 3 is UPR (the unanticipated change in bond credit spread).  Calculate the expected excess return for the asset.
A) 12.32 percent 
B) 9.32 percent 
C) 4.56 percent 
D) 6.32 percent 
E) 8.02 percent

Quizplus · Accepted Answer

The Answer of The table below provides factor risk sensitivities and factor risk premia for a three-factor model for a particular asset, where factor 1 is MP (the growth rate in U.S. industrial production), factor 2 is UI (the difference between actual and expected inflation), and factor 3 is UPR (the unanticipated change in bond credit spread).  Calculate the expected excess return for the asset.
A) 12.32 percent 
B) 9.32 percent 
C) 4.56 percent 
D) 6.32 percent 
E) 8.02 percent

The Table Below Provides Factor Risk Sensitivities and Factor Risk