Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IPIS expected to be 4% and IR 7%. A stock with a beta of 1 on IP and 0.5 on IR currently is expected to provide a rate of return of 13%. If Industrial production actually grows by 5%, while the Inflation rate turns out to be 8%, what is your best guess for the rate of return on the stock? (Round your answer to 1 decimal place.) Rate of return Assume the return on a market Index represents the common factor and all stocks in the economy have a beta of 1. Firm-specific retums all have a standard deviation of 34%. Suppose an analyst studies 20 stocks and finds that one-half have an alpha of 21%, and one-half have an alpha of -21%. The analyst then buys $1.4 million of an equally weighted portfolio of the positive-alpha stocks and sells short $1.4 million of an equally weighted portfolio of the negative-alpha stocks. a. What is the expected return (in dollars), and what is the standard deviation of the analyst's profit? (Enter your answers in dollars not in millons. Do not round Intermediate calculations. Round your answers to the nearest dollar amount.) Expected retum Standard deviation w b-1. How does your answer for standard deviation change if the analyst examines 50 stocks Instead of 20? (Enter your answer in dollars not in millions. Do not round Intermediate calculations. Round your answer to the nearest dollar amount.) Standard deviation b-2. How does your answer for standard deviation change if the analyst examines 100 stocks Instead of 20? (Enter your answer in dollars not in millions.) Standard deviation 7 Most Notable Pro Expanded Academi. Links to get your ite Links to get your ite Free Thesis Stateme mework Due 1101 Fas Help Suve & EX Sub Cheday work Assume the return on a marketindex represents the common factor and stocks in the economy have a beta oft Farm-specific returns I have a standard deviation of 34% Suppose an analyst studies 20 stocks and finds that one hot have an alpha of 27 and one-half have an ipha of 2 The analyst men buys $14 million of an equal weighted portfolio of the positivo-ainha stock and sells short $14 ton of an equaly weighted portfolio of the negative-phasto What is the expected return on orond what is the standard deviation of the analys's profit? (Enter your answers in dollars not in millions. Do not round Intermediate calculations. Round your answers to the nearest doller amount.) Expert Standard U bt. How does your answer for standard on change the systeme Sockstead of 209 ter your answerin dollars not in illo Do not round Intermediate calculations. Round your answer to the nearest or amount) 52. How does your stor standard on changement com 100 nad of 207 your answer dollars nations) Quest asu were to search
