Question: c) A portfolio manager wants to create a simple portfolio from only two stocks, A and B. The returns for stocks A and B are

c) A portfolio manager wants to create a simple portfolio from

c) A portfolio manager wants to create a simple portfolio from only two stocks, A and B. The returns for stocks A and B are given by the following equations: RA = 0.09 1FINF + 1 FGDP + EA and RB = 0.12 + 2FINF + 4FGDP + EB The manager forms a portfolio with market value weights of 40% in Stock A and 60% in Stock B. What is the sensitivity to the portfolio of a 1% rise in inflation? [5 marks] c) A portfolio manager wants to create a simple portfolio from only two stocks, A and B. The returns for stocks A and B are given by the following equations: RA = 0.09 1FINF + 1 FGDP + EA and RB = 0.12 + 2FINF + 4FGDP + EB The manager forms a portfolio with market value weights of 40% in Stock A and 60% in Stock B. What is the sensitivity to the portfolio of a 1% rise in inflation? [5 marks]

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