1. Historically, winner stocks and loser stocks both tend to be growth stocks; they both tend to be medium size stocks. These mean their value beta and size beta are also very similar. Therefore, the winner-minus-loser stock return
A. Cannot be fully explained by the Fama-French 3 factor model
B. Generate zero alpha in the Fama-French 3 factor model
C. Generate negative alpha in the Fama-French 3 factor model
2. Assuming year-end cash flows:
a. The Chicago Hope Hospital purchased a MRI machine for 2 million dollars, using 5 year loan at 10% interest. What will be the annual payment for the machine?
b. The Price of the MRI machine (2mil) is rising at a fixed rate of 5% each year. How much would it cost to replace the MRI machine five years from now?