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.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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	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

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