Assume the Following Data for a Stock: Risk-Free Rate =

question 24

Multiple Choice

Assume the following data for a stock: Risk-free rate = 5 percent; beta (market) = 1.4; beta (size) = 0.4; beta (book-to-market) = −1.1; market risk premium = 7 percent; size risk premium = 3.7 percent; and book-to-market risk premium = 5.2 percent. Calculate the expected return on the stock using the Fama-French three-factor model.

• A)22.3 percent
• B)7.8 percent
• C)10.6 percent
• D)20.9 percent

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Definitions:

Homo Habilis

An extinct species of early humans, known for its use of basic stone tools, living approximately 2.1 to 1.5 million years ago.

Australopithecines

A genus of hominids that lived in Africa between about 4 to 2 million years ago, known for walking upright and being a direct ancestor of modern humans.

Laetoli Site

An archaeological site in Tanzania known for its hominin footprints preserved in volcanic ash, providing evidence of early human bipedalism.

Tanzania

A country located in East Africa known for its vast wilderness areas, including the plains of Serengeti National Park and Kilimanjaro National Park.