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suppose that two factors have been identified for the u.s. economy: the growth rate of industrial production, ip, and the inflation rate, ir. ip is expected to be 4%, and ir 3.0%. a stock with a beta of 1.1 on ip and 0.5 on ir currently is expected to provide a rate of return of 7%. if industrial production actually grows by 7%, while the inflation rate turns out to be 5.0%, what is your revised estimate of the expected rate of return on the stock? (do not round intermediate calculations. round your answer to 1 decimal place.)

Answer :

The expected rate of return would be 22.87%.

r = f + EP ∗ βP + ER ∗ βR is the formula which is used to expected rate of return on the stock .

What is Multifactor Risk Model ?

A multi-factor model is a financial modeling technique that examines and explains asset values using a number of different elements. Multi-factor models show which factors have the most effects on asset prices.

The return on an asset is described by multifactor models in terms of the risk of the asset with regard to a number of factors. The average returns of many hazardous assets are typically explained by systematic variables that are typically included in such models.

To learn more about Multifactor Risk Model checkout the link below :

https://brainly.com/question/18402956

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