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:

Trans-4-methylcyclohexanol

An organic compound characterized by a cyclohexane ring with a methyl group and hydroxyl group in trans configuration relative to each other.

Organic Product

A substance resulting from an organic reaction, often characterized by its carbon-based structure.

Stereochemistry

The study of the spatial arrangements of atoms in molecules and their effects on the physical and chemical properties of those molecules.

(R)-2,3-dimethylhexan-3-ol

An organic compound characterized by its chiral center at the second carbon atom, resulting in the R-configuration.