Identified two important systematic risk factors

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Reference no: EM131552434

Suppose that we have identified two important systematic risk factors: the growth rate of gross domestic product, labeled GDP, and the 30-year bond interest rate, labeled BR. Whole Hog Farms, Inc. has a beta of 1.1 on GDP and .9 on BR. Whole Hog has an exptected stock return of 12%. GDP is expected to be 5.5% and BR 6%. If gross domestic product grows by 3% and the 30-year bond rate turns out to be 9% and no unexpected news specifically concerning Whole Hog occurs, within the Arbitrage Pricing Theory Framework, whiat is your best guess for the rate of return on Whole Hog stock?

Reference no: EM131552434

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