Question
Using the factor beta estimates in the table shown here table below and the monthly expected return estimates in Table 13.1 below , calculate the
Using the factor beta estimates in the table shown here table below and the monthly expected return estimates in Table 13.1 below , calculate the risk premium of General Electric stock(ticker: GE) using the FFC factor specification.(Annualize your result by multiplying by12.) GE?s CAPM beta over the same time period was 1.47. How does the risk premium you would estimate from the CAPMcompare?
The monthly risk premium of General Electric stock is ................%. (Round to three decimalplaces.)
The annual risk premium of General Electric stock is ..................%. (Round to two decimalplaces.)
GE's CAPM beta over the same time period was 1.47. How does the risk premium compare with the risk premium you would estimate from theCAPM?
The annual risk premium produced by the CAPM beta is ..................%. (Round to two decimalplaces.)
How does the risk premium compare with the risk premium you would estimate from theCAPM?(Select from thedrop-down menu.)
The annual risk premium produced by the CAPM beta is than the annual risk premium of General Electric stock.
higher
lower
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
