question The UK is found to have two factors, GDP growth and the inflation...
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The UK is found to have two factors, GDP growth and the inflation rate, that generate the returns of all equities. The expected GDP growth rate in the next year is 2 per cent and the expected inflation rate is 1.5 per cent. Pinto plc has an expected return of 10 per cent, a GDP growth rate factor loading of 1.6 and an inflation rate factor loading of 0.5. If the actual GDP growth rate turns out to be 3 per cent and inflation is 2.3 per cent, what is your estimate of the expected return on Pinto plc?
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