Using the factor beta estimates in the table shown here table below and the monthly expected return estimates in Table 13.1 below , calculate the risk premium of General Electric stock (ticker: GE) using the FFC factor specification. (Annualize your result by multiplying by 12.) GE?s CAPM beta over the same time period was 1.47. How does the risk premium you would estimate from the CAPM compare?

The monthly risk premium of General Electric stock is ................%. (Round to three decimal places.)

The annual risk premium of General Electric stock is ..................%. (Round to two decimal places.)

GE's CAPM beta over the same time period was 1.47. How does the risk premium compare with the risk premium you would estimate from the CAPM?

The annual risk premium produced by the CAPM beta is ..................%. (Round to two decimal places.)

How does the risk premium compare with the risk premium you would estimate from the CAPM?(Select from the drop-down menu.)

The annual risk premium produced by the CAPM beta is . than the annual risk premium of General Electric stock.

higher

lower

i Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Estimated Factor Betas, 2007-2017 Factor MSFT XOM GE MKT SMB HML PR1YR 1.10 -0.71 -0.01 0.66 -0.38 0.17 1.22 -0.29 0.78 0.02 0.21 -0.22 i Data Table m (Click on the following icon in order to copy its contents into a spreadsheet.) FFC Portfolio Average Monthly Returns, 1927-2018 Factor Portfolio Average Monthly Return (%) 95% Confidence Band (%) 0.66 +0.32 MKT-rf SMB 0.22 + 0.19 HML 0.38 + 0.21 PR1YR 0.66 + 0.28 Print Done i Data Table (Click on the following icon in order to copy its contents into a spreadsheet.) Estimated Factor Betas, 2007-2017 Factor MSFT XOM GE MKT SMB HML PR1YR 1.10 -0.71 -0.01 0.66 -0.38 0.17 1.22 -0.29 0.78 0.02 0.21 -0.22 i Data Table m (Click on the following icon in order to copy its contents into a spreadsheet.) FFC Portfolio Average Monthly Returns, 1927-2018 Factor Portfolio Average Monthly Return (%) 95% Confidence Band (%) 0.66 +0.32 MKT-rf SMB 0.22 + 0.19 HML 0.38 + 0.21 PR1YR 0.66 + 0.28 Print Done