Consider a three-factor APT model. The factors and associatedrisk premiums are:

Factor	Risk Premium (%)
Change in GNP	+5.6
Change in energy prices	–1.6
Change in long-term interest rates	+2.6

Calculate expected rates of return on the following stocks. Therisk-free interest rate is 5.6%.

a. A stock whose return is uncorrelated withall three factors. (Do not round intermediate calculations.Enter your answer as a percent rounded to 1 decimalplace.)

Expected rate of return            %

b. A stock with average exposure to each factor(i.e., with b = 1 for each). (Do not roundintermediate calculations. Enter your answer as a percent roundedto 1 decimal place.)

Expected rate of return            %

c. A pure-play energy stock with high exposureto the energy factor (b = 1.9) but zero exposure to theother two factors. (Do not round intermediate calculations.Enter your answer as a percent rounded to 2 decimalplaces.)

Expected rate of return            %

d. An aluminum company stock with averagesensitivity to changes in interest rates and GNP, but negativeexposure of b = –1.5 to the energy factor. (The aluminumcompany is energy-intensive and suffers when energy prices rise.)(Do not round intermediate calculations. Enter your answeras a percent rounded to 2 decimal places.)

Expected rate of return            %