Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 2%, and IR 2.0%. A stock with a beta of 0.9 on IP and 0.4 on IR currently is expected to provide a rate of return of 6%. If industrial production actually grows by 4%, while the inflation rate turns out to be 4.0%, what is your revised estimate of the expected rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)
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Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial...
Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 2%, and IR 2.0%. A stock with a beta of 0.9 on IP and 0.4 on IR currently is expected to provide a rate of return of 6%. If industrial production actually grows by 4%, while the inflation rate turns out to be 4.0%, what is your revised estimate of the expected...
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4% and IR 6%. A stock with a beta of 1 on IP and 0.4 on IR currently is expected to provide a rate of return of 10%. If industrial production actually grows by 5%, while the inflation rate turns out to be 7%, what is your best guess for the rate of return...
Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3% and IR 6%. A stock with a beta of 1 on IP and 0.3 on IR currently is expected to provide a rate of return of 16%. If industrial production actually grows by 4%, while the inflation rate turns out to be 7%, what is your best guess for the rate of return...
Suppose two factors are identified for the US economy: the growth rate of industrial production, IP, and the inflation rate IR IP is expected to be 5% and IR 7%. A stock with a beta of 1 on IP and 0.6 on IR currently is expected o provide a rate of return o 14 t industrial production actually grows by 6%, while the ma on rate tums out to e 99 what s your est ess or e ate ofret...
Problem 2 Part A.1 (Exercise n. 27 in the book). Suppose two factors are identified in the Australian economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4% and IR, 6%, A share with a beta of 1 on IP and 0.4 on IR is expected to provide a rate of return of 14%. If industrial production actually grows by 5%, while the inflation rate turns out to be 7%, what...
1.Assume that CAPM is valid. A share of stock is now selling for $85. It will pay a dividend of $7 per share at the end of the year. Its beta is 1. What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 7% and the expected rate of return on the market portfolio is 17%. (Round your answer to 2 decimal places.) 2.Suppose two factors are identified for the...
A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 4.4 percent, and the interest rate is expected to be 3.9 percent. A stock has a beta of 2.1 on the percentage change in GNP and a beta of –.83 on the interest rate. If the expected rate of return on the stock is 12...
Investors expect the market rate of return this year to be 12.50%. The expected rate of return on a stock with a beta of 0.9 is currently 11.25%. If the market return this year turns out to be 9.70%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Revised rate of return
Suppose there are two independent economic factors, M, and M2. The risk-free rate is 6%, and all stocks have independent firm specific components with a standard deviation of 54%. Portfolios A and B are both well diversified Portfolio Beta on My Beta on M2 Expected Return (x) What is the expected return-beta relationship in this economy? (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Expected retum-beta relationship E(IP) 8P1+ BP2
A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 4.3 percent and the interest rate is expected to be 3.8 percent. A stock has a beta of 2 on the percentage change in GNP and a beta of –.82 on the interest rate. If the expected rate of return on the stock is 11...