Suppose You Identified Three Important Systematic Risk Factors Given by Exports,inflation,and

question 37

Multiple Choice

Suppose you identified three important systematic risk factors given by exports,inflation,and industrial production.At the beginning of the year,a firm's stock return is estimated at 9.6 percent and the growth in the three factors is estimated at −1 percent,2.5 percent,and 3.5 percent,respectively.The factor betas are: β_EX = 1.8,β_I = .7,and β_IP = 1.What would be the stock's total return if the actual growth in each of the factors was equal to the expected growth and no unexpected company news occurred?

• A)4.6 percent
• B)5.9 percent
• C)9.6 percent
• D)14.6 percent
• E)8.7 percent

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Definitions:

Arms Control Treaty

An agreement between nations to regulate and limit the development, production, stockpiling, proliferation, and deployment of armaments.

Carter Doctrine

A policy proclaimed by President Jimmy Carter in 1980, declaring that the United States would use military force if necessary to defend its national interests in the Persian Gulf region.

Soviet Aggression

Refers to the actions taken by the Soviet Union to expand its influence and control over other nations, particularly during the Cold War era.

Persian Gulf

A shallow arm of the Arabian Sea between Iran and the Arabian Peninsula, known for its strategic location and vast oil resources.