Above are the question and the answer. Can you explain where the 12 comes from AND clearly explain your answer in words.

4. Suppose you have calculated the average monthly returns of the Fama-French- Carhart (FFC) portfolios over a long period. You have also estimated the factor betas for Verizon (VZ) stock using monthly return data. All figures are provided in the Table blow Factor Average monthly Portfolios returns of factor Factor betas of VZ portfolios RMkt -of 0.66% 0.490 SMB 0.20% -0.525 HML 0.36% 0.071 PRIYR 0.66% -0.192 Assume that the annual risk-free interest rate is equal to 2%. The annual risk premium of Verizon (VZ) according to the FFC model is closest to: A) 0.306% B) 4.10% C) 2.47% D) 1.43% Annual (RMK-Rf) =12*0.66%=792% Annual SMB =12*0.20% =2.40% Annual HML =12*0.36% =4.32% Annual PRIYR =12*0.66% =792% The Expected Return of Stock =Risk Free Rate+ Factor Beta 1*Annual (RMkt-Rf)+Factor Beta 2*Annual SMB-Factor Beta 3*Annual HML+Factor Beta 3*PRIYR =2%+0.490*792%-0.525*240%+0.071*4.32%-0.192*7.92%=3.41% Average Risk Premium = 3.41%-2% =1.41% (Option d Is correct option)