M4 Suppose the economy contains two risk factors:the GDP growth rate and the interest rate. Expertsexpect the GDP growth rate to be 4% and theinterest rate to be 3%. Fake Inc. has a BGDP of 1.5and BI of 0.5. The analysts expect the return ofFake Inc. stock to be 7%. If the actual GDP growthrate and interest rate are 3% and 4% respectively,what is your best guess for the rate of return onFake Inc. stock?

Three factor model to calculate rate of return on a stock Under this model, risk free rate is…

Suppose the economy contains two risk factors: the GDP growth rate and the interest rate. Experts expect the GDP growth rate to be 4% and the interest rate to be 3%. Fake Inc. has a BGDP of 1.5 and ßI of 0.5. The analysts expect the return of Fake Inc. stock to be 7%. If the actual GDP growth rate and interest rate are 3% and 4% respectively, what is your best guess for the rate of return on Fake Inc. stock?

Suppose the economy contains two risk factors: the GDP growth rate and the interest rate. Experts expect the GDP growth rate to be 4% and the interest rate to be 3%. Fake Inc. has a BGDP of 1.5 and ßI of 0.5. The analysts expect the return of Fake Inc. stock to be 7%. If the actual GDP growth rate and interest rate are 3% and 4% respectively, what is your best guess for the rate of return on Fake Inc. stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 6P

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