Estimate of the expected rate of return on the stock

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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 2.5% and IR 2.6%. A stock with a beta of 2.7 on IP and 2 on IR currently is expected to provide a rate of return of 14%. If industrial production actually grows by 4.6%, while the inflation rate turns out to be 5.2%, what is your revised estimate of the expected rate of return on the stock?

Reference no: EM131055037

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