GAM is also evaluating a stock (Ticker: TPM). TPM has returned 15.2% p.a. with a firm...

 

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GAM is also evaluating a stock (Ticker: TPM). TPM has returned 15.2% p.a. with a firm specific surprise of 4.5% p.a. as this company is relatively young. Variable Change in interest rate Growth in GDP Actual 175bps 35bps Expected 150bps 450bps Factor sensitivity -1.4 2.4 One of your associates suggests that you use a two-factor model to evaluate TPM's expected return based on the information above. (2 marks) GAM is also evaluating a stock (Ticker: TPM). TPM has returned 15.2% p.a. with a firm specific surprise of 4.5% p.a. as this company is relatively young. Variable Change in interest rate Growth in GDP Actual 175bps 35bps Expected 150bps 450bps Factor sensitivity -1.4 2.4 One of your associates suggests that you use a two-factor model to evaluate TPM's expected return based on the information above. (2 marks)

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To evaluate TPMs expected return using a twofactor model you can ... View the full answer