Question Details

(Solution) - Suppose you are given the following information The beta of

Brief item decscription

Solution download

Item details:

Suppose you are given the following information: The beta of a company, b1, is 0.9; the risk-free rates rRF, is 6.8%; and the expected market premium, rM ? rRF, is 6.3%. Because your company is larger than average and more successful than average (that is, it has a lower book to-marker 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, c1, is ?0.5, and the coefficient for the book-to-market effect, d1, is ?0.3. If the expected value of the size factor is 4% and the expected value of the book-to-market factor is 5%, what is the required return using the Fama-French three-factor model? (Assume that ai = 0.0.) What is the required return using CAPM?


About this question:

This question was answered on: Jul 11, 2017

PRICE: $15 (18.37 KB)

Buy this answer for only: $15

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now