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1. Fama-French Three-Factor Model

An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 9%, the return on the SMB portfolio (rSMB) is 3.5%, and the return on the HML portfolio (rHML) is 5.5%. If ai = 0, bi = 1.2, ci = -0.4, and di = 1.3, what is the stock's predicted return? Round your answer to two decimal places.

2. Portfolio Beta

Your retirement fund consists of a $7,500 investment in each of 20 different common stocks. The portfolio's beta is 1.15. Suppose you sell one of the stocks with a beta of 1.0 for $7,500 and use the proceeds to buy another stock whose beta is 1.95. Calculate your portfolio's new beta. Do not round intermediate calculations. Round your answer to two.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92848022

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