Part 5 (ch13) Questions Numeric
Important
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 11.011 and beta is 0.866. The market risk premium is currently 6.994% and the return of the risk-free asset is 3.022. What is the alpha of the stock?
Answer:
- 1.936
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 | 4.993 | 0.907 | 0.993 |
| SMB | 3.007 | 0.788 | 1.119 |
| HML | 4.005 | 0.704 | 1.191 |
| Mom. | 2.481 | 0.592 | 1.281 |
Stock A:
Stock B:
Answer:
11.183
16.273