-An Asset Has the Above Sensitivity to the Market Portfolio

question 29

Multiple Choice

$\begin{array}{|l|l|l|l|}\hline \text { Factor } & {\left[\mathrm{E}\left(\mathrm{R}_{\mathrm{M}}\right) -\mathrm{R}_{\mathrm{F}}\right) } & \mathrm{SMB} & \mathrm{HML} \\\hline \text { Sensitivity } & \mathrm{b}_{\mathrm{i}}=0.60 & \mathrm{~s}_{\mathrm{i}}=-0.44 & \mathrm{~h}_{\mathrm{i}}=0.28 \\\hline \text { Risk premium } & 12.7 \% & -2.17 \% & 3.25 \% \\\hline\end{array}$
-An asset has the above sensitivity to the market portfolio and the risk-free rate is 6%.If an investor uses the CAPM model,but the Fama-French model is the correct model,by how much is the asset's expected return differ?

• A) \( 1.2 \% \)
• B) \( 0.9 \% \)
• C) \( 3.1 \% \)
• D) \( 4.5 \% \)

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