Under the Following Conditions, What Are the Expected Returns for Stocks

question 45

Multiple Choice

Under the following conditions, what are the expected returns for stocks A and B? $$\begin{array} { l l } \lambda ^ { 0 } = 0.035 & b _ { \mathrm { a } , 1 } = 1.00 \\\mathrm { k } _ { 1 } = 0.05 & \mathrm {~b} _ { \mathrm { a } , 2 } = 1.40 \\\mathrm { k } _ { 2 } = 0.06 & \mathrm {~b} _ { \mathrm { b } , 1 } = 1.70 \\& \mathrm {~b} _ { \mathrm { b } , 2 } = 0.65\end{array}$$

• A)14.8% and 13.8%
• B)19.8% and 29.5%
• C)16.0% and 19.8%
• D)16.9% and 15.9%
• E)None of the above

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