Asset Return

Diversified portfolio of small firms 10.3%

Diversified portfolio of large firms 9.8%

Diversified portfolio of high BTM firms 9.4%

Diversified portfolio of low BTM firms 8.9%

S&P 500 index fund 9.9%

Riskless debt 2.2%

3A. What is the value of the Fama-French market factor?

3B. What is the value of the Fama-French SMB factor?

3C. What is the value of the Fama-French HML factor?

3D. Using this information, what would you estimate the cost of equity to be for a firm with a market beta of 2.5, a SMB beta of 0.4, and an HML beta of -0.2?