Suppose your company uses a 2-factor macroeconomic factor model to evaluate stocks and has derived the following results for the stock of XYZ company. Expected return 10% GDP Productivity 2 Inflation factor sensitivity -0.5 Over the past year, GDP grew at a rate that was two percentage points lower than originally expected and inflation rose two percentage points higher than originally expected. XYZ also experienced a large unexpected product recall causing a firm- unique surprise of -4% to its stock price. Based on the information provided, the rate of return for XYZ for the year was closest to:
Suppose your company uses a 2-factor macroeconomic factor model to evaluate stocks and has derived the following results for the stock of XYZ company. Expected return 10% GDP Productivity 2 Inflation factor sensitivity -0.5 Over the past year, GDP grew at a rate that was two percentage points lower than originally expected and inflation rose two percentage points higher than originally expected. XYZ also experienced a large unexpected product recall causing a firm- unique surprise of -4% to its stock price. Based on the information provided, the rate of return for XYZ for the year was closest to:
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter14: Valuation: Market-based Approach
Section: Chapter Questions
Problem 1LIC
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![Suppose your company uses a 2-factor
macroeconomic factor model to evaluate
stocks and has derived the following results
for the stock of XYZ company.
Expected return 10%
GDP Productivity 2
Inflation factor sensitivity -0.5
Over the past year, GDP grew at a rate that
was two percentage points lower than
originally expected and inflation rose two
percentage points higher than originally
expected. XYZ also experienced a large
unexpected product recall causing a firm-
unique surprise of -4% to its stock price.
Based on the information provided, the rate
of return for XYZ for the year was closest to:](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F61e7a972-546e-4844-bc74-b307d6b96550%2F71726183-219c-4830-a7fe-b4f94b37e624%2F2pvlxmb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose your company uses a 2-factor
macroeconomic factor model to evaluate
stocks and has derived the following results
for the stock of XYZ company.
Expected return 10%
GDP Productivity 2
Inflation factor sensitivity -0.5
Over the past year, GDP grew at a rate that
was two percentage points lower than
originally expected and inflation rose two
percentage points higher than originally
expected. XYZ also experienced a large
unexpected product recall causing a firm-
unique surprise of -4% to its stock price.
Based on the information provided, the rate
of return for XYZ for the year was closest to:
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