Estimate of the expected rate of return on the stock

Reference no: EM13891079

Suppose that two factors have been identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4%, and IR 3.5%. A stock with a beta of 2.0 on IP and 1.2 on IR currently is expected to provide a rate of return of 17%. If industrial production actually grows by 5%, while the inflation rate turns out to be 5.6%, what is your revised estimate of the expected rate of return on the stock?

Reference no: EM13891079

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