Question: A researcher has determined that a 2-factor model is appropriate to determine the return on stock. The factors are the percentage change in GNP and
A researcher has determined that a 2-factor model is appropriate to determine the return on stock. The factors are the percentage change in GNP and an interest rate. GNP is expected to grow by 2.8% and the rate interest by 2.6%. A stock has a beta of 1.25% change in GNP and a beta of -,47 on the interest rate. The expected return on stock is 11.1. What is the revised expected return on stock if GNP grows by 2.4% and the interest rate is 2.7%
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