Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums. Factor Risk Premium Industrial production ( I ) 8 % Interest rates ( R ) 4 %...

Suppose that the market can be described by the following three sources of systematic risk with associated risk premiums.

The return on a particular stock is generated according to the following equation:

r = 16% + 1.6I + 0.8R + 1.30C +e

a-1. Find the equilibrium rate of return on this stock using the APT. The T-bill rate is 4%.(Do not round intermediate calculations. Round your answer to 1 decimal place.)

a-2. Is the stock over- or underpriced?