Q1) Risk premium for exposure to aluminium commodity prices is 4% and firm has beta relative to aluminium commodity prices of 0.6. Risk premium for exposure to GDP changes is 6% and firm has beta relative to GDP of 1.2. If risk free rate is 4.0%, determine expected return on this stock?
A) 10.0%
B) 11.5%
C) 13.6%
D) 14.0%
Q2) If only data available is that beta of stock is 1.4, determine the likely return on investment in this stock if market falls 5%?
A) -6%
B) -5%
C) +5%
D) +6%