Assume the Following Data for a Stock: Risk-Free Rate =

Multiple Choice

Assume the following data for a stock: Risk-free rate = 5 percent; beta (market) = 1.4; beta (size) = 0.4; beta (book-to-market) = −1.1; market risk premium = 7 percent; size risk premium = 3.7 percent; and book-to-market risk premium = 5.2 percent. Calculate the expected return on the stock using the Fama-French three-factor model.

A) 22.3 percent
B) 7.8 percent
C) 10.6 percent
D) 20.9 percent