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##### Problem 24-6 (TUTOR WILL YOU PLEASE PLACE HOME IN...

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Problem 24-6 (TUTOR WILL YOU PLEASE PLACE HOME IN A EXCEL SPREADSHEET) CAPM and the Fama-French Three-Factor Model The Capital Market Line and the Security Market Line The Fama-French Three-Factor Model Suppose you are given the following information. The beta of Company i, bi, is 1.1, the risk-free rate, rRF, is 7%; and the expected market premium, rM - rRF, is 4.5%. Assume that ai = 0.0. Use the Security Market Line (SML) of CAPM to find the required return for this company. Round your answer to two decimal places. ?% Because your company is smaller than average and more successful than average (that is, it has a low book-to-market ratio), you think the Fama-French three-factor model might be more appropriate than the CAPM. You estimate the additional coefficients from the Fama-French three-factor model: The coefficient for the size effect, ci, is 0.6, and the coefficient for the book-to-market effect, di, is -0.2. If the expected value of the size factor is 6% and the expected value of the book-to-market factor is 2%, what is the required return using the Fama-French three-factor model? Round your answer to two decimal places. ?%,Tutor thank you for the help is it possible to have this answer on a excel spreadsheet? Thank you

Paper#13631 | Written in 18-Jul-2015

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