Question
suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial production, in the beginning of the year, growth in
suppose that we have identified three important systematic risk factors given by exports, inflation, and industrial production, in the beginning of the year, growth in these three factors is estimated at -1%, 2.5%. and 3 5% respectively. However, actual growth in these factors turn out to be 1%.-2% ,and 2%. the factor betas are given by bex= 1.8, b1=0.7, and bip=1.0.
1. lf the expected return on the stock is 6%, and no unexpected news concerning the stock surfaces calculate the stock's total return
2. calculate the stock's total return if the company announces that they had ab accident and the operating facilities will be closed down for some time thus resulting in a loss by the company of 7% in return.
3. what would the stock total return be if the actual growth in each of the facts was equal to growth expected? assume no unexpected news on the company.
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