The Market Return Is 10% and the Risk Free Rate

question 47

Multiple Choice

The market return is 10% and the risk free rate is 3%. Rascals Inc. has a market beta of 1.0, a SMB beta of −.60, and a HML beta of −0.85. If the risk premium on HML and SMB are both 2%, using the Fama-French Three Factor Model, what is the expected Return on Rascal Inc. stock?

• A) 5.85%
• B) 7.10%
• C) 13.2%
• D) 15.3%

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