Exhibit 93
Use the Information Below for the Following Problem(S)
Stocks

question 53

Multiple Choice

Exhibit 9.3
Use the Information Below for the Following Problem(S)
Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (??) = .025 and the risk premiums for the two factors are (??) = .12 and (??) = .10.
$$\begin{array} { c c c } \text { Stack } & \text { Factor } 1 w _ { i 1 } & \text { Factor } 2 w _ { i 2 } \\\hline \mathrm { A } & - 0.25 & 1.1 \\\mathrm {~B} & - 0.05 & 0.9 \\\mathrm { C } & 0.01 & 0.6\end{array}$$
-Refer to Exhibit 9.3.Suppose that you know that the prices of stocks A,B,and C will be $10.95,22.18,and $30.89,respectively.Based on this information

• A) All three stocks are overvalued.
• B) All three stocks are undervalued.
• C) Stock a is undervalued, stock b is properly valued, stock c is undervalued.
• D) Stock a is undervalued, stock b is properly valued, stock c is overvalued.
• E) Stock a is overvalued, stock b is overvalued, stock c is undervalued.

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Definitions:

Intermittent

Occurring at irregular intervals; not continuous or steady.

Auditory Frequency

Auditory frequency refers to the number of sound vibrations or cycles per second, perceived as the pitch of a sound, measured in hertz (Hz).

Narrow Range

A limited or confined scope or extent, often referring to variations or fluctuations within a restricted interval.

Loud

Loud describes a sound that has a high volume or intensity, often capable of causing a noticeable reaction or discomfort in listeners.