The following four macro-economic factors were identified regarding a stock As returns, the stock sensitivity to each factor and the related risk premium associated with each factor have been calculated as follows: Gross domestic product (GDP) growth=0.6 RP=4% Inflation rate= 0.8, RP=2% Platinum prices=-0.7, RP= 5% Standard and Poor’s 500 index return= 1.3 RP=9% The risk free rate is 3% Calculate the expected rate of return using the Arbitrage pricing theory formula.
The following four macro-economic factors were identified regarding a stock As returns, the stock sensitivity to each factor and the related risk premium associated with each factor have been calculated as follows: Gross domestic product (GDP) growth=0.6 RP=4% Inflation rate= 0.8, RP=2% Platinum prices=-0.7, RP= 5% Standard and Poor’s 500 index return= 1.3 RP=9% The risk free rate is 3% Calculate the expected rate of return using the Arbitrage pricing theory formula.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The following four macro-economic factors were identified regarding a stock As returns, the stock sensitivity to each factor and the related risk premium associated with each factor have been calculated as follows:
Inflation rate= 0.8, RP=2%
Platinum prices=-0.7, RP= 5%
Standard and Poor’s 500 index return= 1.3 RP=9%
The risk free rate is 3%
Calculate the expected
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