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Problem 12-4 Multifactor Models Suppose stock returns can be explained by the following...

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Accounting

Problem 12-4 Multifactor Models
Suppose stock returns can be explained by the following three-factor model:
Ri = RF +\beta 1F1+\beta 2F2\beta 3F3
Assume there is no firm-specific risk. The information for each stock is presented here:
\beta 1\beta 2\beta 3
Stock A 1.85.85.60
Stock B .861.45.80
Stock C .85.361.49
The risk premiums for the factors are 7.3 percent, 6.5 percent, and 6.9 percent, respectively. You create a portfolio with 20 percent invested in Stock A,20 percent invested in Stock B, and the remainder in Stock C. The risk-free rate is 4.4 percent. What is the beta for each factor for the return on your portfolio? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.)
What is the expected return on your portfolio?

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