A researcher has determined that a two-factor model is


A researcher has determined that a two-factor model is appropriate to determine the return on a stock. The factors are the percentage change in GNP and an interst rate. GNP is expected to grow by 3.6%, and the interest rate is expected to be 3.1%. A stock has a beta of 1.4 on the percentage change in GNP and a beta of -.53 on the interest rate. If the expected rate of return on the stock is 11.5%,, what is the revised expected return on the stock if GNP actually grows by 3.2% and the interest rate is 3.4%?

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Financial Management: A researcher has determined that a two-factor model is
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