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Problem 7-10 You have been assigned the task of estimating the expected returns for three different stocks: QRS, TUV, and WXY. Your preliminary analysis has established the historical risk premiums associated with three risk factors that could potentially be included in your calculations: the excess return on a proxy for the market portfolio (MKT), and two variables capturing general macroeconomic exposures (MACRO1 and MACRO2). These values are: MKT = 6.8%, MACRO1 = -0.2%, and MACRO2 = 0.6%. You have also estimated the following factor betas (i.e., loadings) for all three stocks with respect to each of these potential risk factors: FACTOR LOADING Stock MKT MACRO1 MACRO2 QRS 1.25 -0.37 0.00 TUV 0.93 0.54 0.25 WXY 1.04 -0.12 0.00 Calculate expected returns for the three stocks using just the MKT risk factor. Assume a risk-free rate of 3.6%. Round your answers to three decimal places. Expected return for stock QRS: % Expected return for stock TUV: % Expected return for stock WXY: % Calculate the expected returns for the three stocks using all three risk factors and the same 3.6% risk-free rate. Round your answers to three decimal places. Expected return for stock QRS: % Expected return for stock TUV: % Expected return for stock WXY: % What sort of exposure might MACRO2 represent? MACRO2 might represent -Select-a systematican industry-specificItem 7 factor.

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