Suppose the risk-free return is 4.6% and the market portfolio has an expected return of 11.1% and a standarddeviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.73. What is its expected return?The expected return is %. (Round to two decimal places.)

We can use the Capital Asset Pricing Model (CAPM) to calculate the expected return of Johnson &…

Answered: Suppose the risk-free return is 4.6%…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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An analyst has modeled the stock of a company using the Fama-French three-factor model. The market return is 10%, the return on the SMB portfolio (rSMB) is 3.2%, and the return on the HML portfolio (rHML) is 4.8%. If ai = 0, bi = 1.2, ci = 20.4, and di = 1.3, what is the stock’s predicted return?
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Suppose the risk-free return is 4.6% and the market portfolio has an expected return of 11.1% and a standard deviation of 16%. Johnson & Johnson Corporation stock has a beta of 0.73. What is its expected return? The expected return is %. (Round to two decimal places.)