1. Using the factor beta estimates and the monthly expected return estimates in the table shown here, calculate the risk premium of General Electric stock (ticker: GE) using the FFC factor specification. (Annualize your result by multiplying by 12.) GE's CAPM beta over the same time period was 1.02. How does the risk premium you would estimate from the CAPM compare? FACTOR FACTOR AVERAGE MONTHLY RETURN MKT SMB HML PRIYR 0.68 0.20 0.35 0.64 GE'S BETAS 0.67 0.48 0.36 -0.70

1. Using the factor beta estimates and the monthly expected return estimates in the table shown here, calculate the risk premium of General Electric stock (ticker: GE) using the FFC factor specification. (Annualize your result by multiplying by 12.) GE's CAPM beta over the same time period was 1.02. How does the risk premium you would estimate from the CAPM compare? FACTOR FACTOR AVERAGE MONTHLY RETURN MKT SMB HML PRIYR 0.68 0.20 0.35 0.64 GE'S BETAS 0.67 0.48 0.36 -0.70

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 4P: An analyst has modeled the stock of a company using the Fama-French three-factor model. The market...

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