Part 5 (ch13) Questions Numeric
For students
Last updated: 31/01/2025
Type your answers with “.” instead of “,”! For numerical answers, use 2 decimal places. For instance, if your answer is 0.12345 or 12.345%, type, “12.34” in the box.
Q1: Alpha Calculation
Q: Consider a stock whose expected return is 10.996 and beta is 0.785. The market risk premium is currently 6.995% and the return of the risk-free asset is 3.017. What is the alpha of the stock?
Answer:
- 2.489
Q2: Fama-French Portfolio
Q2: Consider the following information regarding the Fama-French-Carhart four factor model. What is the expected return of Stock A (in %)? And Stock B (in %)?
| Factor Port. | Average Return (%) | Stock A Betas | Stock B Betas |
|---|---|---|---|
| Rm - rf | 5.007 | 0.896 | 0.975 |
| SMB | 2.992 | 0.799 | 1.095 |
| HML | 3.996 | 0.697 | 1.186 |
| Mom. | 2.517 | 0.596 | 1.309 |
Stock A:
Stock B:
Answer:
11.16
16.189