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johnpaech johnpaech
wrote...
Posts: 1098
Rep: 7 0
6 years ago
Using the FFC four factor model and the historical average monthly returns, the expected monthly return for Wal-Mart is closest to:
A) 0.71%
B) 0.53%
C) 1.38%
D) 0.79%
Textbook 
Corporate Finance: The Core

Corporate Finance: The Core


Edition: 4th
Authors:
Read 87 times
1 Reply

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wrote...
6 years ago
D
Explanation:  D)
Factor Portfolio   Average Monthly Return (%)   IBM Factor Betas   GE Factor Betas   Wal-Mart Factor Betas   IBM Return Calc.   GE Return Calc.   Wal-Mart Return Calc.
Rm - rf   0.64   0.712   0.937   0.782   0.456   0.600   0.500
SMB   0.17   -0.103   -0.214   0.224   -0.018   -0.036   0.038
HML   0.53   0.124   0.154   0.123   0.066   0.082   0.065
PR1 YR   0.76   0.276   -0.147   0.247   0.210   -0.112   0.188
            E[Rs] =   0.714   0.533   0.791
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