Inflation that exceeds anticipated inflation would have distinctive impacts that depends upon your identity or who you are. A worker would most likely feel the repercussions as lower compensation, loss of rewards, and the failure to work extra time, consequently prompting less obtaining power.
If inflation is higher than expected, the losers are the individuals who consent and agree to offer or sell at a value that anticipated lower inflation and the individuals who consented to pay the cost or price are considered as the winners.
Answer: See explanation
Explanation:
The formula to use here will be:
required rate = risk free rate + beta × (market return - risk free rate).
where,
risk free rate = 5%
beta =0.20.
market return = -30%.
Therefore,
required return = 5% + 0.20 × (-30% + -5%)
= 5% + 0.2(-35%)
= 5% - 7%
= -2%
Therefore, the return on portfolio should have been -2% but the portfolio manager produced a return of −10%
Since -10% is lower than -2%, we can deduce that the claim of the manager is wrong.
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