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Research Has Identified Two Systematic Factors That Affect U

question 18

Multiple Choice

Research has 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 is that has a beta of 1.2 on the industrial production factor and 0.5 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?

Recognize how shifts in factor demand result from changes in various economic conditions.

Understand the concept of rent and the factors determining it.

Comprehend how changes in productivity directly affect input demand curves.

Understand the optimal combination of inputs for production efficiency.

Definitions:

Contrast Effect

Occurs when the meaning of something that takes place is based on a contrast with another recent event or situation.

Compared

The act of evaluating two or more items, ideas, or individuals to identify similarities, differences, or relative merits.

Recently Encountered

Recently encountered refers to something or someone that has been discovered, met, or dealt with in the near past.

Attribution Theory

A concept in psychology that explains how individuals pinpoint the causes of their own and others' behaviors and events.