The Market Return Is 10% and the Risk Free Rate

question 44

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. The risk premium on HML and SMB are both 2%. If the single factor model generates a regression coefficient of 1.3, using the Fama-French Three Factor Model, what is the different in returns between the Three-Factor model and the single factor model expected returns on Rascal Inc. stock?

• A) 2.8%
• B) 5.0%
• C) 5.2%
• D) 6.3%

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Definitions:

Vibrations

Oscillatory motions or forces, which in a medical context, may refer to tactile sensations used in diagnostic examinations to assess nerve function or somatosensory response.

Eustachian Tube

A tube that connects the middle ear to the nasopharynx, helping to equalize pressure on both sides of the eardrum.

Ear Infections

Inflammation or infection in the ear, often caused by bacteria or viruses, leading to symptoms such as earache, fever, and hearing problem.

Immune System

The body's defense against infectious organisms and other invaders through a coordinated response involving cells, tissues, and organs.