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

question 3

Multiple Choice

Under the following conditions, what are the expected returns for stocks Y and Z? $$\begin{array} { l l } \lambda ^ { 0 } = 0.04 & b _ { y , 1 } = 0.5 \\k _ { 1 } = 0.07 & b _ { y , 2 } = 1.3 \\k _ { 2 } = 0.05 & b _ { z , 1 } = 1.2 \\& b _ { z , 2 } = 0.9\end{array}$$

• A)12.0% and 13.3%
• B)13.5% and 14.2%
• C)13.9% and 15.6%
• D)14.0% and 16.9%
• E)15.8% and 17.3%

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