Exhibit 92
Use the Information Below for the Following Problem(S)
Consider

question 50

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) .
$$\begin{array} { c c c } \text { Stack } & \text { Factor 1 Londine } & \text { Factor } 2 \text { Londing } \\\hline X & - [ .55 & 1.2 \\Y & - [ .10 & 0.85 \\Z & 0.35 & 0.5\end{array}$$
The zero-beta return (??) = 3%, and the risk premia are ?? = 10%, ?? = 8%. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 9.2.The new prices now for stocks X,Y,and Z that will not allow for arbitrage profits are

• A) $53.55, $54.4, $55.25
• B) $45.35, $54.4, $55.25
• C) $55.55, $56.35, $57.15
• D) $50, $50, $50
• E) $51.35, $47.79, $51.58.

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Definitions:

Differentiated Product

is a good or service that is distinguished from similar products by unique characteristics, branding, or quality, allowing it to compete on factors other than price.

Inelastic Demand

A situation where the demand for a product does not change significantly with a change in price.

Marginal Revenue

The rise in income achieved by selling an extra unit of a product or service.

Price Searcher

A seller that determines the selling price of its product or service based on market conditions, demand, and competition, instead of adhering to a market dictated price.