SMALL			BIG
	Low	Medium	High	Low	Medium	High
Ave 1	1.0658	1.2361	1.5147	0.9225	0.9272	1.2764
Ave 2	0.8986	1.2558	1.3624	0.9267	0.9908	1.0887
SD1	8.1038	8.2273	10.0162	5.7961	6.6705	8.7584
SD2	6.8098	5.3825	5.5700	4.7012	4.3725	4.9146
Skew1	1.2889	1.6169	2.3286	-0.0257	1.6694	1.7480
Skew2	-0.4087	-0.5339	-0.4504	-0.3251	-0.4093	-0.5204
Kurt1	10.2735	13.5372	18.0033	6.7632	17.4930	14.8482
Kurt2	1.9277	3.2174	3.8985	1.9199	2.3740	2.7469

1.) Calculate the average monthly return premium on the SMB and HML portfolios in the second period (1971-2018). For example, SMB will be given by [(B4+C4+D4) (E4+F4+G4)]/3. Similarly,HML will be given by [(D4 B4) + (G4 E4)]/2, i.e., the average of the two differences observed. Convert the monthly premiums to annual rates by using the following formula:

P_a = (1 + P_m)¹² - 1

Note: All the returns in the table above are in percentages. Always perform mathematical operations using numbers in decimal format, in this case, the values divided by 100.

2.) Recall the 3-factor FF model:

E(R_i) = R_f + B_m (R_m - R_f) + B_SMB (S - R_f - (B - R_f)) + B_HML (H - R_f - (L - R_f))

= R_f + B_m (R_m - R_f) + B_SMB (S - B) + B_HML (H - L)

State the risk/return relationship above, if the annual risk-free rate is 2% and the return on the market portfolio is 6.5%

3.) You are valuing a company using the Gordon Growth Model with constant growth rate of 3%, and the most recent dividend payment of $1 per share. Find the fair market value of the company using the CAPM model, if the stock has a beta of 1.2.

4.) Using the same company and data as in part (3), compute the fair value of the company, if the SMB beta is -0.2, and the HML beta is 0.7. Contrast your finding to that of part (3). What do you conclude? Can you characterize this company with the data available?