Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 4%, the expected risk premium

The following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 4%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.1%, and the expected risk premium on the book-to-market factor is 4.3%. Market Size Book-to-market Ford 1.38 -0.21 0.72 Ford Walmart Citigroup Apple Walmart 0.82 -0.42 -0.33 Expected return % % % % Citigroup 1.19 -0.46 0.99 Apple 1.39 Calculate the expected return on each stock. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. -0.59 -0.72
image text in transcribed
The following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 4%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3,1%, and the expected risk premium on the book-to-market factor is 4.3%. Calculate the expected return on each stock. Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

ISE Financial Markets And Institutions

Authors: Anthony Saunders, Marcia Cornett, Otgo Erhemjamts

8th International Edition

1265561435, 9781265561437

More Books

Students also viewed these Finance questions

Question

Define Administration and Management

Answered: 1 week ago

Question

Define organisational structure

Answered: 1 week ago

Question

Define line and staff authority

Answered: 1 week ago

Question

Define the process of communication

Answered: 1 week ago

Question

Explain the importance of effective communication

Answered: 1 week ago