Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Suppose two factors are identified for the U.S. economy: the growth rate of industrial
production, IP, and the inflation rate, IR. IP is expected to be 5% and IR 6%. A stock with a
beta of 1 on IP and 0.8 on IR currently is expected to provide a rate of return of 13%. If
industrial production actually grows by 6%, while the inflation rate turns out to be 7%,
what will be your expected rate of return on the stock, given the new information about
the industrial production rate and the inflation rate? (Enter your answer as a percentage
rounded to 1 decimal places.)
Expected rate of return
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Transcribed Image Text:Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 5% and IR 6%. A stock with a beta of 1 on IP and 0.8 on IR currently is expected to provide a rate of return of 13%. If industrial production actually grows by 6%, while the inflation rate turns out to be 7%, what will be your expected rate of return on the stock, given the new information about the industrial production rate and the inflation rate? (Enter your answer as a percentage rounded to 1 decimal places.) Expected rate of return
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