A researcher has determined that a two-factor model is appropriate to determine the return on a...
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 percent, what is the revised expected return on the stock if GNP actually grows by 4.0 percent and the interest rate is 4.2 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
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A researcher has determined that a two-factor model is
appropriate to determine the return on a...
A researcher has determined that a two-factor model is appropriate to determine the return on a...
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...
A researcher has determined that a two-factor model is appropriate to determine the return on a...
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 5 percent and the interest rate is expected to be 4.5 percent. A stock has a beta of 2.7 on the percentage change in GNP and a beta of –.73 on the interest rate. If the expected rate of return on the stock is 13...
A researcher has determined that a two-factor model is appropriate to determine the return on stock....
A researcher has determined that a two-factor model is appropriate to determine the return on stock. The factors are the percentage change in GNP and in interest rate. GNP is expected to grow by 3.5 percent and the interest rate is expected to be 2.9 percent. A stock has a beta of 1.3 on the percentage change in GNP and a beta of -.47 on the interest rate. If the expected rate of return on the stock is 10.2 percent,...
Consider a three-factor APT model. The factors and associated risk premiums are: Risk Premium (%) Factor Change in gros...
Consider a three-factor APT model. The factors and associated risk premiums are: Risk Premium (%) Factor Change in gross national product (GNP) Change in energy prices Change in long-term interest rates +6.4 0.6 +2.8 Calculate expected rates of return on the following stocks. The risk-free interest rate is 6.5% a. A stock whose return is uncorrelated with all three factors. (Enter your answer as a percent rounded to 1 decimal place.) b. A stock with average exposure to each factor...
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those...
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart: Factor β Expected Value Actual Value GDP .0008621 $14,236 $14,222 Inflation −.90 3.9% 3.7% Interest rates −.47 7.2% 7.0% a. What is the systematic risk of the stock return? (A negative answer should be indicated by a negative sign. Do not round intermediate calculations and enter your answer as a percent rounded...
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those...
Suppose a three-factor model is appropriate to describe the returns of a stock. Information about those three factors is presented in the following chart: Factor β Expected Value Actual Value GDP .0008741 $14,251 $14,238 Inflation -.91 4.0% 3.8% Interest rates -.48 7.4% 7.2% a. What is the systematic risk of the stock return? (A negative answer should be indicated by a negative sign. Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places,...
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 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...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z...
Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z has a beta of 0.85 and an expected return of 10.4 percent. Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Risk-free rate %
A stock has an expected return of 10.6 percent, its beta is 0.99, and the risk-free...
A stock has an expected return of 10.6 percent, its beta is 0.99, and the risk-free rate is 6.2 percent. Required: What must the expected return on the market be? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).) Expected return %
Consider a three-factor APT model. The factors and associated risk premiums are: Risk Premium (%) Factor Change in gross national product (GNP) Change in energy prices Change in long-term interest rates +6.4 0.6 +2.8 Calculate expected rates of return on the following stocks. The risk-free interest rate is 6.5% a. A stock whose return is uncorrelated with all three factors. (Enter your answer as a percent rounded to 1 decimal place.) b. A stock with average exposure to each factor...
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...
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