This model argues that a security's required return is a function of the market risk premium, the company's size, and the company's book-to-market value ratio.

A. Capital Asset Pricing Model B. Fama-French three-factor model

This model relies on only one explanatory factor for a security's (or portfolio's) required return and imposes a large number of restrictive and unrealistic assumptions. A. Capital Asset Pricing Model B. Fama-french three-factor model

Julian, an analyst at Butoh Computers (BC), models the stock of the company. Suppose that the risk-free rate rRF =6.5%, the required market return rM = 12.5 %, the risk premium for small stocks rsMB = 3. 2%, and the risk premium for value stocks rHML = 4 .8% . Suppose also that Julian ran the regression for Butoh Computers's stock and estimated the following regression coefficients: aBc = 0 . 00, bBc = 0 .9, CBC= 0.2, and dBc = 0.3. If Julian uses a Fama-French three-factor model, then which of the following values correctly reflects the stock's required return?

A. 13.98% B. 17.94% C. 3.18% D. 7.48%