Suppose your company uses a 2-factor macroeconomic factor model to evaluate stocks and has derived the following results for the stock of XYZ company. Expected return 10% GDP Productivity 2 Inflation factor sensitivity -0.5 Over the past year, GDP grew at a rate that was two percentage points lower than originally expected and inflation rose two percentage points higher than originally expected. XYZ also experienced a large unexpected product recall causing a firm- unique surprise of -4% to its stock price. Based on the information provided, the rate of return for XYZ for the year was closest to:

Suppose your company uses a 2-factor macroeconomic factor model to evaluate stocks and has derived the following results for the stock of XYZ company. Expected return 10% GDP Productivity 2 Inflation factor sensitivity -0.5 Over the past year, GDP grew at a rate that was two percentage points lower than originally expected and inflation rose two percentage points higher than originally expected. XYZ also experienced a large unexpected product recall causing a firm- unique surprise of -4% to its stock price. Based on the information provided, the rate of return for XYZ for the year was closest to:

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter10: Measuring Exposure To Exchange Rate Fluctuations

Section: Chapter Questions

Problem 41QA

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