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Please answer question 5 with parts A and B. Show work please. Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 7% Factor Inflation Industrial production Oil prices Expected rate of return a. If T-bills currently offer a 9% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Factor Beta 1.8 1.3 0.9 Factor Inflation Industrial production Oil prices Expected rate of return % b. Suppose that the market expects the values for the three macro factors given in column 1 below, but that the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" become known. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Expected Value 5% 10 6 42 % Actual Value 3% 6 e

Please answer question 5 with parts A and B. Show work please. Consider the following multifactor (APT) model of security returns for a particular stock. Factor Risk Premium 7% Factor Inflation Industrial production Oil prices Expected rate of return a. If T-bills currently offer a 9% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Factor Beta 1.8 1.3 0.9 Factor Inflation Industrial production Oil prices Expected rate of return % b. Suppose that the market expects the values for the three macro factors given in column 1 below, but that the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" become known. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Expected Value 5% 10 6 42 % Actual Value 3% 6 e

Essentials Of Investments
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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Please answer question 5 with parts A and B. Show work please. Factor Inflation Industrial production Oil prices Consider the following multifactor (APT) model of security returns for a particular stock. Expected rate of return Factor Beta 1.8 1.3 0.9 Factor Inflation Industrial production Oil prices Expected rate of return a. If T-bills currently offer a 9% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) % Expected Value 5% Factor Risk Premium 7% b. Suppose that the market expects the values for the three macro factors given in column 1 below, but that the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" become known. (Do not round intermediate calculations. Round your answer to 1 decimal place.) 4 2 10 6 % 3 c Actual Value 3% 6 0
Transcribed Image Text:Please answer question 5 with parts A and B. Show work please. Factor Inflation Industrial production Oil prices Consider the following multifactor (APT) model of security returns for a particular stock. Expected rate of return Factor Beta 1.8 1.3 0.9 Factor Inflation Industrial production Oil prices Expected rate of return a. If T-bills currently offer a 9% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) % Expected Value 5% Factor Risk Premium 7% b. Suppose that the market expects the values for the three macro factors given in column 1 below, but that the actual values turn out as given in column 2. Calculate the revised expectations for the rate of return on the stock once the "surprises" become known. (Do not round intermediate calculations. Round your answer to 1 decimal place.) 4 2 10 6 % 3 c Actual Value 3% 6 0
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