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 5% and IR 7%. A stock with a beta of 1 on IP and 0.6 on IR currently is expected to provide a rate of return of 14%. If industrial production actually grows by 6%, while the inflation rate turns out to be 9%, what is your best guess for the rate of return on the stock?
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