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You estimate that the market risk premium is 8%, the size premium is 2%, the book-to-market premium is 2%, and the risk free rate is 1%. All of these expected returns are APR rates compounded annually. You believe that American Express has a market beta of 1.25, a size beta of 0.5, and a book-to-market beta of 0.5. Based on the Fama and French (1993) 3 factor model, what is this stock's expected return? Your answer should be entered as a percent and if necessary rounded to the nearest percent.

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Financial Management, Finance

Category:- Financial Management
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