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 1.55 .75 .30
Stock B .85 1.55 −.50
Stock C .79 −.26 1.35
The risk premiums for the factors are 6.7 percent, 5.9 percent, and 6.3 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 3.8 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? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)