Question

If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation, would result in a change in any security return of

Answer 1

The systematic response coefficient from inflation, would result in a change in any security return of 3.2 βI.

Explanation:

Given:

Expected rate of inflation = 3%

Actual rate of inflation = 6.2%

The change in security return can be calculated by obtaining the differences between actual and expected levels of inflation.

Change in security return= Actual rate of inflation- Expected rate of inflation

                                                     = 6.2%-3%

                                                     = 3.2%

Change in security return= 3.2 βI