(Solution) - Using the five macroeconomic factors described in the text you -(2025 Original AI-Free Solution)

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Academic Level: Undergrad. (yrs 3-4)

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Using the five macroeconomic factors described in the text, you outline the factor exposures of two stocks as follows:

a. What would be the factor exposures of a portfolio invested half in stock A and half in stock B?
b. Contrary to general forecasts, you expect strong economic growth with a slight increase in inflation. Which stock should you overweigh in your portfolio?