Suppose a factor model is appropriate to describe the returns on a stock. The current...
50.1K
Verified Solution
Link Copied!
Question
Accounting
Suppose a factor model is appropriate to describe the returns on a stock. The current expected return on the stock is 10.5 percent. Information about those factors is presented in the following chart:
Factor
Expected Value
Actual Value
Growth in GNP
1.74
2.5%
3.0%
Inflation
1.36
4.7
5.2
a.
What is the systematic risk of the stock return? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Systematic risk of the stock return
%
b.
The firm announced that its market share had unexpectedly increased from 23 percent to 27 percent. Investors know from past experience that the stock return will increase by .65 percent for every 1 percent increase in its market share. What is the unsystematic risk of the stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Unsystematic risk of the stock return
%
c.
What is the total return on this stock? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Total return on this stock
%
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
