Exhibit 14 -Refer to Exhibit 14

question 10

Multiple Choice

Exhibit 14.11
Use the Information Below for the Following Problem(S)
$\begin{array}{lcc}\text { Investment } & \text { Beta } & \text { Analyst's Estimated Return } \\\hline \text { Stock } \mathrm{X} & 2.3 & 15.5 \% \\\text { Stock } \mathrm{Y} & 1.2 & 13.6 \% \\\text { Market Portfolio } & 1.0 & 11.5 \%\end{array}$

-Refer to Exhibit 14.11.Based on the analyst's estimated return and the stocks' betas the analyst should

• A) Sell both Stock X and Stock Y
• B) Sell Stock X and Buy Stock Y
• C) Buy Stock X and Sell Stock Y
• D) Buy both Stock X and Stock Y
• E) None of the above

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Definitions:

Asymmetric Information

A situation where one party to a market transaction has much more information about a product or service than the other. The result may be an under- or overallocation of resources.

Inefficient Outcomes

Situations where resources are not allocated optimally, resulting in potential losses in economic welfare.

Allocative Efficiency

A state of resource allocation where it is impossible to make any one individual better off without making someone else worse off, often achieved when marginal cost equals marginal benefit.

Government Budget

A financial statement presenting the government's projected revenue and spending for a specific fiscal period, outlining planned financial operations and priorities.