Question
Allison, an analyst at Fantastique Tech (FT), models the stock of the company. Suppose that the risk-free rate rRFrRF = 5%, the required market return
Allison, an analyst at Fantastique Tech (FT), models the stock of the company. Suppose that the risk-free rate rRFrRF = 5%, the required market return rMrM = 10%, the risk premium for small stocks rSMBrSMB = 3.2%, and the risk premium for value stocks rHMLrHML = 4.8%. Suppose also that Allison ran the regression for Fantastique Techs stock and estimated the following regression coefficients: aFTaFT = 0.00, bFTbFT = 1.2, cFTcFT = -20.4, and dFTdFT = -1.3. If Allison uses a Fama-French three-factor model, then which of the following values correctly reflects the stocks required return?
-72.52%
-60.52%
-50.48%
-65.52%
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