Exhibit 87
Use the Information Below for the Following Problem(S)
You

question 110

Multiple Choice

Exhibit 8.7
Use the Information Below for the Following Problem(S)
You expect the risk-free rate (RFR) to be 4 percent and the market return to be 10 percent. You also have the following information about three stocks.
$\begin{array}{ccccc}\text { Stock } & \text { Beta } & \begin{array}{c}\text { Current } \\\text { Price }\end{array} & \begin{array}{c}\text { Expected } \\\text { Price }\end{array} & \begin{array}{c}\text { Expected } \\\text { Dividend }\end{array} \\\hline \mathrm{A} & 1.5 & \$ 10 & \$ 11.50 & \$ 1.00 \\\mathrm{~B} & 1.1 & \$ 27 & \$ 30 & \$ 0.00 \\\mathrm{C} & 0.8 & \$ 35 & \$ 36 & \$ 1.50\end{array}$

-Refer to Exhibit 8.7.What is your investment strategy concerning the three stocks?

• A) Buy A and B, sell C.
• B) Sell A, B and C.
• C) Sell A and B, buy C.
• D) Buy A , B and C.
• E) Buy A and C , sell B.