Problem:
An analyst has modeled the stock of a company using the Fama-French three-factor modle. The risk-free rate is 5%, the market return is 10%, the return on the SMB portfolio is 3.2%, and the return on the HML portfolio is 4.8%. If a =0, b=1.2, c=-0.4, and d=1.3.
Required:
Question: What is the stock's predicted return?
Note: Please show how to work it out.