Question 5 Between 2008 and 2017, the returns on Micro fund average 10% a year. In his 2017 discussion of performance, the fund president noted that this was 2.5% a year better than the UK stock market, a result that he attributed to the funds strategy of buying stocks with outstanding management. The following table shows the returns on the market, size factors and the interest rate during this period: Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Market Risk Premium -38.34 28.26 17.37 0.44 16.28 35.2 11.7 0.07 13.3 21.5 Return on Size Factor 3.26 9.28 13.77 -6.04 -1.22 7.35 -7.75 -3.73 6.66 -4.85 Return on Book to-Market Factor 0.97 -9.14 -5.17 -8.41 9.89 1.54 -1.65 -9.48 23.33 -13.85 Interest Rate 1.6 0.1 0.12 0.04 0.06 0.02 0.02 0.02 0.2 0.8 Micro fund sensitivity: Mkt 0.9 SMB 1.4 HML -0.4 a) Calculate Micro funds expected returns according to the Fama-French factors. [8 marks] b) Evaluate the performance of the fund during this period. [7 marks] [Total of Question 5: 15 marks]