he following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 5%, the expected risk premium on the market is 8%, the expected risk premium on the size factor is 3.8%, and the expected risk premium on the book-to-market factor is 3.8%. Ford Walmart Citigroup Apple Market 1.43 0.92 1.24 1.44 Size −0.26 −0.37 −0.51 −0.64 Book-to-market 0.67 −0.28 1.04 −1.02 Calculate the expected return on each stock.
he following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 5%, the expected risk premium on the market is 8%, the expected risk premium on the size factor is 3.8%, and the expected risk premium on the book-to-market factor is 3.8%. Ford Walmart Citigroup Apple Market 1.43 0.92 1.24 1.44 Size −0.26 −0.37 −0.51 −0.64 Book-to-market 0.67 −0.28 1.04 −1.02 Calculate the expected return on each stock.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
he following table shows the sensitivity of four stocks to the three Fama-French factors. Assuming that the interest rate is 5%, the expected risk premium on the market is 8%, the expected risk premium on the size factor is 3.8%, and the expected risk premium on the book-to-market factor is 3.8%.
| Ford | Walmart | Citigroup | Apple | |
|---|---|---|---|---|
| Market | 1.43 | 0.92 | 1.24 | 1.44 |
| Size | −0.26 | −0.37 | −0.51 | −0.64 |
| Book-to-market | 0.67 | −0.28 | 1.04 | −1.02 |
Calculate the expected return on each stock.
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