By careful reflection and analysis, Mr Fabian Factoriensis has developed the following two-factor model:

R_i = a + b_i,1F₁ + b_i,2F₂ + _i,

where R_i is the return of a company b_i,j is the factor loading of company i against factor j, F_j is the factor j, and _i is a mean zero idiosyncratic error term.

Compute the value of the constant a in the two-factor model.

Instructions:

• The answer is given using two decimal places.

• Should

  there be intermediate steps in your calculations, please remember to

  keep a large number of decimal places in all intermediate calculations,

  as the final answer needs to be exact.