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12.1 Factor models. A researcher has determined that a two-factor model is appropriate for calculating the performance of a stock. The factors are the percentage
12.1 Factor models. A researcher has determined that a two-factor model is appropriate for calculating the performance of a stock. The factors are the percentage change in GDP and an interest rate. GDP is expected to grow 3.6% and the interest rate to be 3.1%. a stock has a beta of 1.4 on the percentage change in GDP and a beta of -0.53 on the interest rate. If the expected rate of return on the stock is 11.5%, what will the revised expected return on the stock be if GDP grows 3.2% and the interest rate is 3.4%
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