The risk-free rate and expected return on the market

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Reference no: EM13878179

1. Consider the CAPM. The risk-free rate is 3% and the expected return on the market is 11%. What is the expected return on a stock with a beta of 1.95?

2. Using the data from problem 20, what is the expected return on the stock according to the Fama and French 3 factor model? The additional information you discovered is an expected return of 2.25% on the size (SMB) portfolio and an expected return of 3.50% on the book–to–market (HML) portfolio, plus the stock has a factor sensitivity or beta of –0.75 on SMB and 0.95 on HML.

Reference no: EM13878179

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