Financial Risk Manager Part 1
Get started today
Ultimate access to all questions.
An analyst is evaluating how Stock A's returns are influenced by different macroeconomic factors. The sensitivity of Stock A's return to these factors is quantified by the following factor betas:
- Industrial production: 1.30
- Interest rate: -0.75
Currently, it is assumed that a 3.0% increase in industrial production and an interest rate of 1.5% lead to a projected return of 5.0% for Stock A. The economic research team forecasts a significant economic upturn for the next year, expecting a 4.2% increase in industrial production and a 25 basis point rise in interest rates, bringing them to 1.75%. Based on these predictions, what return for Stock A is projected for the upcoming year?
An analyst is evaluating how Stock A's returns are influenced by different macroeconomic factors. The sensitivity of Stock A's return to these factors is quantified by the following factor betas:
- Industrial production: 1.30
- Interest rate: -0.75
Currently, it is assumed that a 3.0% increase in industrial production and an interest rate of 1.5% lead to a projected return of 5.0% for Stock A. The economic research team forecasts a significant economic upturn for the next year, expecting a 4.2% increase in industrial production and a 25 basis point rise in interest rates, bringing them to 1.75%. Based on these predictions, what return for Stock A is projected for the upcoming year?
Exam-Like