Exhibit 92
Use the Information Below for the Following Problem(S)
Consider

question 41

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) .
$$\begin{array} { c c c } \text { Stack } & \text { Factor 1 Londine } & \text { Factor } 2 \text { Londing } \\\hline X & - [ .55 & 1.2 \\Y & - [ .10 & 0.85 \\Z & 0.35 & 0.5\end{array}$$
The zero-beta return (??) = 3%, and the risk premia are ?? = 10%, ?? = 8%. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 9.2.The expected returns for stock X,stock Y,and stock Z are

• A) 3%, 8%, 10%
• B) 7.1%, 10.5%, 8.8%
• C) 7.1%, 8.8%, 10.5%
• D) 10%, 5.5%, 14%
• E) None of the above.

Calculate the effects of inflation on real and nominal rates of interest.

Apply the concept of utility maximization to determine optimal consumption choices in various scenarios.

Interpret the implications of different utility functions on consumption decisions.

Evaluate the effect of technological or environmental changes on consumption and saving decisions.

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Definitions:

Reflex

An automatic and involuntary response to a stimulus, bypassing conscious thought.

Automatic Response

A reaction that occurs without conscious thought, typically as a result of learned behaviors or instincts.

Spinal Cord

a vital part of the central nervous system located within the spine, transmitting nerve signals between the brain and the rest of the body.

Spatial Attention

The ability to prioritize visual processing on a particular spatial location in the field of view to enhance detection and analysis of relevant information.