Question 89

Academic research points to various factors impacting stock returns. In addition to overall market impacts, size and investment style appear to have an effect. The particular sensitivity of an individual stock to the overall market is 0.8, size is 1.4, and style is −0.4. If the risk-free rate is 0.1%, and the factors associated with the market, size, and style, respectively, are 7%, 3.2%, and 1.6%, what is the expected return of that stock?