The following table shows the sensitivity of four stocks to the three Fama–French factors. Estimate the expected return on each stock assuming that the interest rate is .2%, the expected risk premium on the market is 7%, the expected risk premium on the size factor is 3.6%, and the expected risk premium on the book-to-market factor is5.2%.
Answer to relevant QuestionsIn footnote 4 we noted that the minimum-risk portfolio contained an investment of 73.1% in Campbell Soup and 26.9% in Boeing. Prove it. John Barleycorn estimates his firm’s after-tax WACC at only 8%. Nevertheless he sets a 15% companywide discount rate to offset the optimistic biases of project sponsors and to impose “discipline” on the ...You are given the following information for Golden Fleece Financial:Long-term debt outstanding: ........ $300,000Current yield to maturity (r debt): ............... 8%Number of shares of common stock: ....... ...True or falsea. Hedging transactions in an active futures market have zero or slightly negative NPVs.b. When you buy a futures contract, you pay now for delivery at a future date.c. The holder of a financial futures contract ...Phoenix Motors wants to lock in the cost of 10,000 ounces of platinum to be used in next quarter’s production of catalytic converters. It buys three-month futures contracts for 10,000 ounces at a price of $1,250 per ...
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