Assume three-factor model is suiatble to describe returns of stock. Information about those three factors is presented in following chart. Assume this is only information you have concerning the factors.
Factor Beta of Factor Expected Value Actual Value
GNP 0.0042 $4,416 $4,480
Inflation -1.40 3.1% 4.3%
Interest Rate -0.67 9.5% 11.8%
a. what financial concept or principle is problem asking to solve.
b. in context of problem case, prepare some business decisions which a manager would be able to make after solving this problem.
c. is there any extra information missing from this problem which would improve decision-making process.
d. without illustrating mathemathical calculations, describe in writing how you would solve problem.