Question: Problem 2 Part A.1 (Exercise n. 27 in the book). Suppose two factors are identified in the Australian economy: the growth rate of industrial production,

Problem 2 Part A.1 (Exercise n. 27 in the book). Suppose

Problem 2 Part A.1 (Exercise n. 27 in the book). Suppose two factors are identified in the Australian economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 4% and IR, 6%, A share with a beta of 1 on IP and 0.4 on IR is expected to provide a rate of return of 14%. If industrial production actually grows by 5%, while the inflation rate turns out to be 7%, what is your best guess for the rate of return on the share

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