Two-factor model is appropriate to determine return on stock

Assignment Help Financial Management

Reference no: EM131620247

A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 3.7 percent, and the interest rate is expected to be 3.2 percent. A stock has a beta of 1.4 on the percentage change in GNP and a beta of –.76 on the interest rate.

If the expected rate of return on the stock is 10 percent, what is the revised expected return on the stock if GNP actually grows by 3.3 percent and the interest rate is 3.5 percent? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Revised expected return %

Reference no: EM131620247

Questions Cloud

How much of this judgment would the insurance cover : Becky Fenton has 55/110/65 automobile insurance coverage. how much of this judgment would the insurance cover?

Enroll in the blue cross and blue shield plan : What annual medical costs will Ronald pay using the sample medical expenses provided if he were to enroll in the Blue Cross/Blue Shield plan?

Price change by using both duration and convexity : Now let's assume that the convexity of this bond is 13.47. Please estimate the price change by using both duration and convexity.

Maximizing shareholder wealth and never paying bribes : Is there a conflict between maximizing shareholder wealth and never paying bribes when doing business abroad?

Two-factor model is appropriate to determine return on stock : A researcher has determined that a two-factor model is appropriate to determine the return on a stock.

Acquaint with financial markets products and services : After getting acquaint with financial markets products and services, discuss should Moonn make her investment decision based on her advisor above clarifications

Used as the discount rate in capital budgeting : Weighted average cost of the company is often used as the discount rate in capital budgeting.

An overview of the global financial markets : After completing the reading of “An overview of the Global Financial Markets” Moonn stated the regarding trends in growth of global financial markets.

Steps for present value with risk aversion : Steps for present value with risk aversion. Would you make the investment if you use present value with risk aversion?

User Account

All Pages