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What is a fair rate of return on XYZ according to the FF3FM

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Reference no: EM132849882

Question - An analyst has modeled XYZ stock using the Fama & French three factor model (FF3FM). Over the past few years the risk premium on SMB was 2.95% and the risk premium on HML was 3.95%. Regression analysis shows that XYZ's beta coefficient on SMB is 2.25 and on HML is -2.50. If the risk-free rate is 3.50%, the market risk premium is 7.75%, and XYZ's market beta is 1.80, what is a fair rate of return on XYZ according to the FF3FM?

Reference no: EM132849882

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