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Compute for the expected return of the stock

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Reference no: EM132979484

Problem 1: There are several factors that have been identified as explaining a stock's return. If the risk-free rate is 3%, compute for the expected return of the stock given its sensitivity to each factor (Beta) and the Market Rate of Return (MRR) associated with each factor:

Gross domestic product (GDP) growth: ß = 0.6, MRR = 4%
Inflation rate: ß = 0.8, MRR = 5%
Gold prices: ß = -0.7, MRR = 7%
Standard and Poor's 500 index return: ß = 1.3, MRR = 6%

Reference no: EM132979484

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