Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 interst rate. GNP is expected to grow by 3.6%, and the interest rate is expected to be 3.1%. A stock has a beta of 1.4 on the percentage change in GNP and a beta of -.53 on the interest rate. If the expected rate of return on the stock is 11.5%,, what is the revised expected return on the stock if GNP actually grows by 3.2% and the interest rate is 3.4%?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started