Sean is reviewing the asset allocation in his portfolio. For that purpose, he is analysing three exchange traded funds (ETFs) with the following exposures to the three factors in the Fama-French (FF) model: ETF Beta on RM Beta on SMB Beta on HML Expected Return Rock 0.9 -0.5 0.7 20% Scissors O 0.8 0 30% Paper 1.4 0 0 25% Assuming that the risk-free interest rate is 5% p.a.: a) What is the risk premium associated with each of the factors in the FF model? [4 marks] b) What is the implied expected return-beta relationship prevailing in this economy? [3 marks] c) What should be the allocation (%) across the three ETFs and the risk-free asset if you want to create a portfolio with an exposure of 1 to the HML factor? [4 marks] d) Explain how the SMB and HML portfolios are constructed. [4 marks]