suppose that two factors have been identified for the u.s. economy: the growth rate of industrial production, ip, and the inflation rate, ir. ip is expected to be 4%, and ir 3.5%. a stock with a beta of 2.0 on ip and 1.2 on ir currently is expected to provide a rate of return of 17%. if industrial production actually grows by 5%, while the inflation rate turns out to be 5.6%, what is your revised estimate of the expected rate of return on the stock? (do not round intermediate calculations. round your answer to 1 decimal place.)

When the initial sanctioned estimate is anticipated to increase by more than 5% as a result of changes in the amount of material or rates, this document is created. It is a brand-new, comprehensive estimate for the extra work in addition to the initial estimate. It is necessary when additional development is needed as work is being done.

The final budget, also known as the original budget adjusted for all reserves, carryover funds, transfers (virement), allocations, supplemental appropriations, and other authorized legislative or similar authority changes applicable to the budget period, is known as the "revised estimate"; Samples 1 and 2.

Given Information

Old rate of return = 17%

Unexpected changes in factors = 2.0 and 1.2

Sensitivity coefficients = 2.0

Solution

Revised estimate = 17% + [(1 x 1) + (0.2 x 1.)] = 18.6%

Therefore the revised estimate value is 18.6%

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