The winner-minus-loser stock return

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1. Historically, winner stocks and loser stocks both tend to be growth stocks; they both tend to be medium size stocks. These mean their value beta and size beta are also very similar. Therefore, the winner-minus-loser stock return

A. Cannot be fully explained by the Fama-French 3 factor model

B. Generate zero alpha in the Fama-French 3 factor model

C. Generate negative alpha in the Fama-French 3 factor model

2. Assuming year-end cash flows:

a. The Chicago Hope Hospital purchased a MRI machine for 2 million dollars, using 5 year loan at 10% interest. What will be the annual payment for the machine?

b. The Price of the MRI machine (2mil) is rising at a fixed rate of 5% each year. How much would it cost to replace the MRI machine five years from now?

Reference no: EM132038699

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