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What is the sensitivity to the portfolio

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A portfolio manager wants to make simple portfolio from only two stocks, Y and Z. The returns for stocks Y and Z are given by the following equations: RY = 0.09 - 1FINF + 1FGDP + εY and RZ = 0.12 + 2FINF + 4FGDP + εZ

The manager forms a portfolio with market value weights of 40% in Stock Y and 60% in Stock Z.

What is the sensitivity to the portfolio of a 1% rise in inflation?

Reference no: EM132764587

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