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how do i solve this - Suppose I believe a Macroeconomic multifactor asset pricing model is a correct description of the risk-return relationship for equity
how do i solve this - Suppose I believe a Macroeconomic multifactor asset pricing model is a correct description of the risk-return relationship for equity returns. The model takes the following form: Ri=ai+b1Inflation+b2GDP+ei - I plan on buying two stocks with the following factor sensitivities: a. What is the model of your portfolio if you decide to invest 50% in Stock X and 50% in Stock Y ? b. What is the expected return of the above portfolio? c. What is the return of the portfolio, if you expected the value of inflation and GDP to be 0 but the actual values are 0.5% and 1% respectively
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