User Account

All Pages

Find the required return for this company

Assignment Help Finance Basics
Reference no: EM131100732

Suppose you are given the following information. The beta of company i, bi, is 1.1, the risk-free rate, rRF, is 7 percent, and the expected market premium, rM - rRF, is 6.5 percent. (Assume that ai = 0.0.) 
a. Use the Security Market Line (SML) of CAPM to find the required return for this company.
b. Because your company is smaller than average and more successful than average (that is, it has a low book-to-market ratio), you think the Fama-French three factor model might be more appropriate than the CAPM. You estimate the additional coefficients from the Fama-French three-factor model: The coefficient for the size effect, ci, is 0.7, and the coefficient for the book-to-market effect, di, is -0.3. If the expected value of the size factor is 5 percent and the expected value of the book-to-market factor is 4 percent, what is the required return using the Fama-French three-factor model? 

Reference no: EM131100732

Questions Cloud

Identify crisis intervention services : Identify crisis intervention services, what types of services are provided, who provides the services, and the steps to providing the services.
Question regarding the potential entrepreneur : Entrepreneurs have a tolerance for ambiguity, are calculated risk takers, and exude passion. What do these characteristics mean for any potential entrepreneur?
Basis of the moral rights according to a utilitarian view : 1. Define the following: a right, a legal right, a moral right, a human right. How are they related? 2. What three (3) features define a moral right? 3. How do we know that people have rights? What is the basis of the moral rights according to a ut..
How was power distributed in your family of origin : Why do you think this is a topic that is unclear and difficult for individuals to discuss? How do you think we go about changing the conversation and dialogue on intersex and other gender issues?
Find the required return for this company : Suppose you are given the following information. The beta of company i, bi, is 1.1, the risk-free rate, rRF, is 7 percent, and the expected market premium, rM - rRF, is 6.5 percent. (Assume that ai = 0.0.) a. Use the Security Market Line (SML) of CAP..
Examine whether or not us consumers should boycott : Examine whether or not US consumers should boycott or increase in the purchase of these goods and the effects that boycott or increase in purchase would have on the workers.
Children of hispanic versus non-hispanic populations : Are asthma prevalence rates significantly different between male and female children of Hispanic versus non-Hispanic populations?
Program a pla to implement the three boolean functions : E15: Fundamentals of Digital Systems - Fall 2015 - HOMEWORK 10. Program a PLA to implement the three Boolean functions
Globalization and canadian firms : Module 1 introduced the nature of international business and global economic development and tried to impress upon you the broadening scope and influence of globalization. In Parts A and B of this assignment, you will reflect back on the research ..

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd