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:

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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Similar questions

Stormy Weather has no attractive investment opportunities. It's return on equity equals the discount rate, which is 10%. It's expected earnings this year are $3 per share. Complete the following table.
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 28% for the next 2 years, 18.00% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.25%. The company’s last dividend was $1.00, its beta is 1.75, the market risk premium is 6.55%, and the risk-free rate is 4.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
If the economy booms, RTF, Incorporated, stock is expected to return 10 percent. If the economy goes into a recessionary period, then RTF is expected to only return 3 percent. The probability of a boom is 65 percent while the probability of a recession is 35 percent. What is the variance of the returns on RTF, Incorporated, stock?
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 21.45% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.50%. The company’s last dividend was $1.75, its beta is 1.15, the market risk premium is 9.70%, and the risk-free rate is 5.00%. What is the current price of the common stock? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
According to equity analysts at Goldman Sachs, over the next year, there is a 13% chance of an economic boom and a 75% likelihood of a normal economy. You just bought shares of Time Warner (ticker symbol: TWX) that are expected to earn 14% in a booming economy and 8% in a normal economy. What is Time Warner’s expected return if the company is expected to lose 4% in a recessionary economy? a. 7.69 b. 7.34 c. 6.43 d. 4.00 e. 8.30
Assume that the average firm in C&J Corporation's industry is expected to grow at a constant rate of 4% and that its dividend yield is 8%. C&J is about as risky as the average firm in the industry and just paid a dividend (DO) of $2. Analysts expect that the growth rate of dividends will be 50% during the first year (g0,1 = 50%) and 20% during the second year (g1,2 = 20%). After Year 2, dividend growth will be constant at 4%. What is the required rate of return on C&J's stock? What is the estimated intrinsic price per share? Do not round intermediate calculations. Round the monetary value to the nearest cent and percentage value to the nearest
Digital Technology wishes to determine its coefficient of variation as a company over time. The firm projects the following data (in millions of dollars): Year 1 3 6 9 Profits: Expected Value $ 97 135 243 277 Year 1 3 6 a. Compute the coefficient of variation (V) for each time period. Note: Round your answers to 3 decimal places. 9 Standard Deviation $34 55 Yes 128 176 No b. Does the risk (V) appear to be increasing over a period of time? Coefficient of Variation
Matteo Company was expected to pay a $4.00 dividend in the coming year, dividends were expected to grow at a 7% rate indefinitely, and investors required a 12% rate of return. Recently, however, Matteo introduced a successful new product line. As a result, analysts have revised their estimates to a $5.00 dividend and an 8% growth rate, and they have decreased their required rate of return to 11%. What change in the price of Matteo stock should occur as a result of these events? +$ 86.67. +$ 80.00. +$ 25.00. +$166.67.
A company has predicted earnings per share (EPS) of $3.74 and a degree of financial leverage of 2.4 at the predicted level of EBIT. What is the expected percentage change in EPS if EBIT turn out to be 10% lower than expected?
Suppose a firm has had the following historic sales figures. Year: 2016 Sales $1,420,000 2017 $1,720,000 Next year's sales 2018 2019 2020 $1,600,000 $2,010,000 $1,770,000 What would be the forecast for next year's sales using FORECAST.ETS to estimate a trend? Note: Round your answer to the nearest whole dollar. 27

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