Analyst reports have identified two systematic factors that affect U.S. stock returns. The factors are growth in industrial production and changes in long-term interest rates. Industrial production growth is expected to be 3%, and long-term interest rates are expected to increase by 1%. You are analyzing a stock that has a beta of 1.2 on the industrial production factor and .5 on the interest rate factor. It currently has an expected return of 12%.

However, if industrial production actually grows 5% and interest rates drop 2%, what is your best guess of the stock’s return? “A15.90%B12.90%C13.20%D12%

Don't use plagiarized sources. Get Your Custom Essay on
Just from $13/Page
Order Essay

An investor may buy into the bond market when prices are dropping because they can be sold for a profit when prices rise. There is an inverse relationship between price and yield of fixed-income securities so when interest rates fall, bond prices rise. An investor who wishes to profit in this manner will need to purchase bonds when interest rates are high and sell when rates decline. Yes or No

Place Order
Grab A 14% Discount on This Paper
Pages (550 words)
Approximate price: -
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Try it now!

Grab A 14% Discount on This Paper

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.