Question
Suppose that two factors have been identified for the Canadian economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is
Suppose that two factors have been identified for the Canadian economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 3%, and IR 4.0%. A stock with a beta of 2.8 on IP and 2.2 on IR currently is expected to provide a rate of return of 15%. If industrial production actually grows by 7%, while the inflation rate turns out to be 7.0%, what is your revised estimate of the expected rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.)
Revised expected rate of return
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