Exhibit 92
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider

question 34

Multiple Choice

Exhibit 9.2
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the three stocks, stock X, stock Y and stock Z, that have the following factor loadings (or factor betas) . $$\begin{array} { c c c } \text { Stock } & \text { Factor 1 Loading } & \text { Factor 2 Loading } \\\hline \mathrm { X } & - 0.55 & 1.2 \\\mathrm { Y } & - 0.10 & 0.85 \\\mathrm { Z } & 0.35 & 0.5\end{array}$$ The zero-beta return ( $\lambda$ ₀) = 3%, and the risk premia are $\lambda$ ₁ = 10%, $\lambda$ ₂ = 8%. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 9.2. Assume that you wish to create a portfolio with no net wealth invested. The portfolio that achieves this has 50% in stock X, -100% in stock Y, and 50% in stock Z. The weighted exposure to risk factor 1 for stocks X, Y, and Z are

• A)0.50, -1.0, 0.50
• B)-0.50, 1.0, -0.50
• C)0.60, -0.85, 0.25
• D)-0.275, 0.10, 0.175
• E)None of the above.

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Definitions:

Psychological Well-Being

A multidimensional state that includes individuals' emotional, psychological, and social well-being, reflecting overall satisfaction with life, sense of purpose, and ability to manage stress.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underemphasizing the role and power of situational influences.

Clumsy Person

An individual frequently making awkward movements or having accidents due to poor coordination or lack of physical skill.

Self-Serving Bias

The tendency to take credit for one’s successes and to deny responsibility for one’s failures.