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The expected premium on small stocks relative to large stocks is 6%, and the expected risk premium on low book-to-market stocks relative to high book-to-market stocks is 4%. Assume that the expected risk premium on the overall stock market relative to the risk-free rate is 5%. A particular stock has a market beta of 0.8, a size beta of 0.2, and a book-to-market beta of 0.4. If the risk-free-rate is 4%, what is the expected return on this stock according to the Fama-French model? SHOW DETAILED WORK WITH EXPLANATIONS.

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Financial Management, Finance

Category:- Financial Management
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