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 -0.42 -0.33 Expected return % % % % 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

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
icon
Related questions
Question
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
Transcribed Image Text: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
Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Knowledge Booster
Investment in Stocks
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education