The following four macro-economic factors were identified regarding a stock As returns, the stock sensitivity...
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The following four macro-economic factors were identified regarding a stock As returns, the stock sensitivity to each factor and the related risk premium associated with each factor have been calculated as follows:
Gross domestic product (GDP) growth=0.6 RP=4%
Inflation rate= 0.8, RP=2%
Platinum prices=-0.7, RP= 5%
Standard and Poors 500 index return= 1.3 RP=9%
The risk free rate is 3%
Calculate the expected rate of return using the Arbitrage pricing theory formula.
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