Asset Return

Diversified portfolio of small firms $8\mathrm{.}8\%$

Diversified portfolio of large firms $7\mathrm{.}2\%$

Diversified portfolio of high BTM firms $9\mathrm{.}4\%$

Diversified portfolio of low BTM firms $8\mathrm{.}9\%$

S&P $500$ index fund $9\mathrm{.}2\%$

Riskless debt $3\mathrm{.}1\%$

a$.$ What is the value of the Fama$-$French market factor?

b$.$ What is the value of the Fama$-$French SMB factor?

c$.$ What is the value of the Fama$-$French HML factor?

d$.$ Using this information, what would you estimate the cost of equity to be for a firm with a market beta of $1\mathrm{.}4,$ a SMB beta of $-0\mathrm{.}3,$ and an HML beta of $0\mathrm{.}8?$

e$.$ In general terms, how would you construct a weather factor to add to a Fama$-$French style pricing model?