Suppose Binder Corporation's common stock has an actual return of 12.3 percent compared to its expected return
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Question:
Suppose Binder Corporation's common stock has an actual return of 12.3 percent compared to its expected return of 9.6 percent. The risk-free rate was expected to be 4.3 percent, and the actual risk-free rate was as expected. The beta on unexpected inflation is 0.9 and the beta on unexpected GNP is 1.1. If inflation unexpectedly increased by 1.4 percent, what was the unexpected change in GNP?
Assume that unexpected inflation and unexpected GNP are independent and are the APT factors.
a.
1.38 percent
b.
1.30 percent
c.
−1.38 percent
d.
−0.56 percent
Related Book For
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt
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