The stock of Osaka Corporation has an expected return of 8.2 percent and betas of: BGNP = 1.23; BI= .97; and PEx = 1.08. This expectation is based on a three-factor model with expected values of: GNP growth of -1 percent; inflation of 2.4 percent; and export growth of 3.5 percent. However, actual growth in these factors turns out to be .55 percent, 1.8 percent, and 2.6 percent, respectively. Assuming there was no unexpected news related specifically to the stock, what was the stock's total rate of return?

The stock of Osaka Corporation has an expected return of 8.2 percent and betas of: BGNP = 1.23; BI= .97; and PEx = 1.08. This expectation is based on a three-factor model with expected values of: GNP growth of -1 percent; inflation of 2.4 percent; and export growth of 3.5 percent. However, actual growth in these factors turns out to be .55 percent, 1.8 percent, and 2.6 percent, respectively. Assuming there was no unexpected news related specifically to the stock, what was the stock's total rate of return?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 1E: The forecasting staff for the Prizer Corporation has developed a model to predict sales of its...

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