The Fama-French Three-Factor Model of Expected Returns Includes the Following

question 44

Multiple Choice

The Fama-French three-factor model of expected returns includes the following three factors:

• A)the market risk premium,the size of firms and the risk free rate.
• B)the risk free rate,the market risk premium and price earnings ratios.
• C)the market risk premium,the size of firms and book-to-market ratios.
• D)the market risk premium,the risk free rate and book-to-market ratios.

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Definitions:

Return

The income generated from an investment, expressed as a percentage of the original investment cost.

Discounted Payback

A payback period calculation that takes into account the time value of money by discounting each of the cash flows from the project at a particular rate before it sums them to determine the break-even point.

Payback Period

The time required for the return on an investment to "pay back" the sum of the original investment, commonly used as a measure of investment risk.

Profile

A description or analysis of the characteristics, qualities, or activities of a person, organization, or thing.