The following table shows the sensitivity of four stocks to the three Fama–French factors. Estimate the expected return on each stock assuming that the interest rate is 2%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.2%, and the expected risk premium on the book-to-market factor is 4.9%.

Quickbooks Online Accounting
3rd Edition
ISBN:9780357391693
Author:Owen
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Chapter5: Operating Activities: Purchases And Cash Payments
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The following table shows the sensitivity of four stocks to the three Fama–French factors. Estimate the expected return on each stock assuming that the interest rate is 2%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.2%, and the expected risk premium on the book-to-market factor is 4.9%.

 

Market
Size
Book-to-market
Ford
1.24
-0.07
0.28
Walmart
0.41
-0.47
-0.25
Citigroup
1.52
-0.01
0.85
Apple
1.25
-0.67
-0.72
Transcribed Image Text:Market Size Book-to-market Ford 1.24 -0.07 0.28 Walmart 0.41 -0.47 -0.25 Citigroup 1.52 -0.01 0.85 Apple 1.25 -0.67 -0.72
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