PRIN.OF CORP.FINANCE-CONNECT ACCESS
13th Edition
ISBN: 2810023360757
Author: BREALEY
Publisher: MCG
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Chapter 8, Problem 21PS
Three-factor model*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%.
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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%.
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
Ford
1.38
-0.21
0.72
Ford
Walmart
Citigroup
Apple
Walmart
0.82
Expected return
%
%
%
%
-0.42
-0.33
Citigroup
1.19
-0.46
0.99
Apple
1.39
Book-to-market
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
Using the CAPM, estimate the appropriate
required rate of return for the three stocks
listed here, given that the risk-free rate is 6
percent and the expected return for the
market is 14 percent.
STOCK
ВЕТА
A
0.62
B
1.09
1.48
a. Using the CAPM, the required rate of
return for stock A is
%.
(Round to two decimal places.)
b. Using the CAPM, the required rate of
return for stock B is
%.
(Round to two decimal places.)
c. Using the CAPM, the required rate of
return for stock C is
%.
(Round to two decimal places
Chapter 8 Solutions
PRIN.OF CORP.FINANCE-CONNECT ACCESS
Ch. 8 - Efficient portfolios For each of the following...Ch. 8 - Efficient portfolios Figure 8.11 purports to show...Ch. 8 - Portfolio risk and return Look back at the...Ch. 8 - Portfolio risk and return Mark Harrywitz proposes...Ch. 8 - Portfolio risk and return Ebenezer Scrooge has...Ch. 8 - Portfolio risk and return Here are returns and...Ch. 8 - Portfolio risk and return Percival Hygiene has IO...Ch. 8 - Sharpe ratio Use the long-term data on security...Ch. 8 - Portfolio beta Refer to Table 7.5. a. What is the...Ch. 8 - CAPM True or false? Explain or qualify as...
Ch. 8 - CAPM True or false? a. The CAPM implies that if...Ch. 8 - CAPM Suppose that the Treasury bill rate is 6%...Ch. 8 - CAPM The Treasury bill rate is 4%, and the...Ch. 8 - Cost of capital Epsilon Corp. is evaluating an...Ch. 8 - APT Consider a three-factor APT model. The factors...Ch. 8 - Prob. 18PSCh. 8 - APT Consider the following simplified APT model:...Ch. 8 - Prob. 20PSCh. 8 - Three-factor modelThe following table shows the...Ch. 8 - Efficient portfolios Look again at the set of the...
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