Financial Risk Manager Part 1

ShipLink, a United States cargo company, considers the return earned on its stock as heavily sensitive to GDP and consumer sentiments. You have been given the following data:

• Expected return for Shiplink stock = 10%
• GDP factor beta = 2
• Expected growth in GDP = 3%
• Consumer sentiment factor beta = 2.5
• Expected growth in consumer sentiment = 2%

Suppose revised macroeconomic data suggests the GDP will grow by 4% rather than 3% and that consumer sentiments will grow by 3% rather than 2%. Determine the revised return for Shiplink stock, assuming no new information is available regarding the firm-specific return.