Coach Eric Taylor wants you to calculate the expected return of stocks issued by the for-profit colleges Oklahoma Tech University (OTU) and Texas Methodist University (TMU). Using historical data, you estimate that the average premium for the 3 FF factors are:

Factor

Average Premium

rM - rf

8.0%

rSMB

3.0%

rHML

3.5%

You run a regression of excess returns for stocks OTU and TMU on the three factors to estimate each stocks factor loading for each of the 3 factors. These regressions give the following results:

Stock

RMRF

SMB

HML

OUT

0.7

0.4

0.5

TMU

1.2

1.1

-0.2

If the T-bill rate is 1%, what is the expected return for stock TMU?