19.a)

What do Fama and French's three-factor model say?

Choose one option:

1. Only beta can be used to predict a stock's return.

2. Companies that have just increased in value will continue to increase in value (momentum)

3. A stock's return is not predictable because the market is efficient.

4. Small companies and companies with a lot of book values relative to the market value have given higher returns.

19b)

Can we use CAPM to assess the value of uncertain cash flows?

Choose one option:

1. Yes, and we must use a discount factor that is adapted to the risk, where the risk is measured by the standard deviation of the uncertainty of the cash flow.

2. Yes, and we use risk-free interest rates as discount rates.

3. Yes, and we must use a discount rate that is adapted to the risk, where the risk is measured by how much of the uncertainty fluctuates with the market.

4. No that does not work.