If the expected rate of inflation was 3% and the actual rate was 6.2%; the systematic response coefficient from inflation,b_I ,would result in a change in any security return of ___ b_I . A)9.2 B)3.2 C)-3.2 D)3.0 E)6.2

Question

Quizplus · Accepted Answer

The systematic response coefficient from inflation, b_I, measures the sensitivity or responsiveness of securities returns to changes in inflation. It can be calculated as: b_I = (actual inflation - expected inflation) = (6.2% - 3%) = 3.2% Therefore, a change in any security return would be expected to be 3.2 times the change in inflation based on the given coefficient. Therefore, the answer is B, which is 3.2.

If the Expected Rate of Inflation Was 3% and the Actual