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Suppose two factors are identified for the U.S. economy: the growth rate of industrial production, IP, and the inflation rate, IR. IP is expected to be 6% and IR 5%. A stock with a beta of 1 on IP and 0.4 on IR currently is expected to provide a rate of return of 14%. If industrial production actually grows by 7%, while the inflation rate turns out to be 7%, what is your best guess for the rate of return on the stock? (Round your answer to 1 decimal place.)

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Financial Management, Finance

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