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

question 24

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.If you know that the actual prices one year from now are stock X $55,stock Y $52,and stock Z $57,then

• A) stock X is undervalued, stock Y is undervalued, stock Z is undervalued.
• B) stock X is undervalued, stock Y is overvalued, stock Z is overvalued.
• C) stock X is overvalued, stock Y is undervalued, stock Z is undervalued.
• D) stock X is undervalued, stock Y is overvalued, stock Z is undervalued.
• E) stock X is overvalued, stock Y is overvalued, stock Z is undervalued.

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Definitions:

Disaster

A sudden event, such as a natural catastrophe or human-made crisis, that causes great damage or loss of life.

Obsessive-compulsive Disorder

A mental disorder characterized by repetitive, unwanted thoughts (obsessions) and irrational, excessive urges to do certain actions (compulsions).

Ritual

A set of fixed actions and sometimes words performed regularly, especially as part of a ceremony or for religious purposes.

Relief

A feeling of reassurance and relaxation following the removal of stress or discomfort.