Question
3. Suppose the market follows a Fama-French Three-factor model (FF3), where the market has expected return of 0.07, E(r_hml) is 0.08, and E(r_smb) is 0.2.
3.
Suppose the market follows a Fama-French Three-factor model (FF3), where the market has expected return of 0.07, E(r_hml) is 0.08, and E(r_smb) is 0.2. Suppose a stock has market beta of 1.2, HML beta of 1, and SMB beta of 1.8. Given this stock has expected return of 0.518, what is the risk-free rate?
| 0.03 | ||
| -0.006 | ||
| 0.015 | ||
| -0.45 | ||
| 0.005 |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Focus On Personal Finance
Authors: Jack Kapoor, Les Dlabay, Robert J. Hughes, Melissa Hart
7th Edition
1265521972, 978-1265521974
