Question
let say that 2 factors have been identified for the US. economy the growth rate of industrial production, IP, and the inflation rate, IR. IP
let say that 2 factors have been identified for the US. economy the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3%, and IR 5%, A stock with a beta of 1.0 on IP and 5 on LR currently is expected to provide a rate of return of 12%. If industrial production actually grows by 5%, while the inflation rate turns out to be 8%, what is your revised estimate of the expected rate of return on the stock?
complete the answer please and show me how:
IP = 3%
IR = 5%
BETA ON IP = 1
BETA ON IR = 0.5
EXPECTED RETURN ON IR = 12%
IP GROWTH RATE = 5%
IR GROWTH RATE = 8%
EXPECTED RETURN ON IR=
then
your revised estimate of the expected rate of return on the stock=
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