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.

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Definitions:

Compensatory Rule

A decision-making strategy where negative attributes can be compensated for by positive attributes.

Product Signal

An indicator or marker that conveys information about the qualities or characteristics of a product to consumers.

Simple Additive Decision Rule

A decision-making process in which options are evaluated by summing up the merits or scores of their attributes, simplifying the choice among multiple alternatives.

Decision Rules

Guidelines or criteria used by consumers or individuals in making choices among various alternatives.