Derivatives Markets

7. Using the Fema-French-Carhart (FFC) four-factor model and the historical average monthly returns below, determine the expected annual effective return for IBM. Factor Portfolio Rm -rf SMB HML PR1 YR Average Monthly IBM Factor Return (%) Betas 0.64 0.712 0.17 -0.103 0.53 0.124 0.76 0.276 A) 8.6% C) 9.2% E) 9.8% B) 8.9% D) 9.5%