Asset Return Diversified portfolio of small firms 10.3% Diversified portfolio of large firms 9.8% Diversified portfolio of
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Question:
Asset Return
Diversified portfolio of small firms 10.3%
Diversified portfolio of large firms 9.8%
Diversified portfolio of high BTM firms 9.4%
Diversified portfolio of low BTM firms 8.9%
S&P 500 index fund 9.9%
Riskless debt 2.2%
3A. What is the value of the Fama-French market factor?
3B. What is the value of the Fama-French SMB factor?
3C. What is the value of the Fama-French HML factor?
3D. Using this information, what would you estimate the cost of equity to be for a firm with a market beta of 2.5, a SMB beta of 0.4, and an HML beta of -0.2?
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