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

question 40

Multiple Choice

Under the following conditions, what are the expected returns for stocks X and Y? $$\begin{array} { l l } \lambda ^ { 0 } = 0.05 & b _ { x , 1 } = 0.90 \\k _ { 1 } = 0.03 & b _ { x , 2 } = 1.60 \\k _ { 2 } = 0.04 & b _ { y , 1 } = 1.50 \\& b _ { y , 2 } = 0.85\end{array}$$

• A)14.1% and 12.9%
• B)12.5% and 19.5%
• C)19.5% and 18.5%
• D)21.2% and 18.5%
• E)None of the above

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