CFA Practice Question

There are 119 practice questions for this study session.

CFA Practice Question

Assume that a stock's returns are affected by two factors: surprises in inflation and surprises in GDP growth: R = 8% - 0.5 Finfl + 1.25FGDP + ε

Suppose the error term is 0.2%. If the inflation was expected to be 2% but it'??s actually 2.5%. GDP growth was supposed to be 2.4% but it was actually 2.1%. What should be the return on the stock?
A. 7.375%
B. 7.575%
C. 8.325%
Explanation: 8% - 0.5 x 0.5% + 1.25 x (-0.3%) + 0.2% = 7.575%

User Contributed Comments 0

You need to log in first to add your comment.