Question: Problem 6-4 Fama-French Three-Factor Model An analyst has modeled the stock of a company using a Fama-French three-factor model. The risk-free rate is 4%, the

Problem 6-4 Fama-French Three-Factor Model

An analyst has modeled the stock of a company using a Fama-French three-factor model. The risk-free rate is 4%, the market return is 10%, the return on the SMB portfolio (r_SMB) is 3.6%, and the return on the HML portfolio (r_HML) is 5.4%. If a_i = 0, b_i = 1.2, c_i = - 0.4, and d_i = 1.3, what is the stock's predicted return? Round your answer to two decimal places.

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