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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
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 I plan on buying both stocks to create a portfolio. The portfolio is made up of 30% of Stock X and 70% of Stock Y with the following factor sensitivities: 1. What is the model of your portfolio if you decide to make your portfolio up of 30% of Stock X and 70% of Stock Y ? 2. What is the expected return of this portfolio according to this model? 3. Using the following information, what is the return of your portfolio
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