- CFA Exams
- CFA Level I Exam
- Study Session 16. Portfolio Management (1)
- Reading 44. Using Multifactor Models
- Subject 2. Factors and types of multifactor models

###
**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 F

B. 8.25%

C. 8.35%

_{infl}+ 1.25F_{GDP}+ εSuppose the error term is 0.6%. If inflation was expected to be 2% but it'??s actually 2.5%, and the GDP surprises is 0%, what should be the return on the stock?

A. 8%

B. 8.25%

C. 8.35%

Correct Answer: C

8% - 0.5 x 0.5% + 0.6% = 8.35%

###
**User Contributed Comments**
0

You need to log in first to add your comment.