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:

Investment Account

A financial account held at a financial institution that contains securities, cash, and other assets managed for the purpose of achieving an investment goal.

Related Income

Income generated from transactions or relationships between affiliated entities or parties.

Revaluation

The process of adjusting the exchange rate of a currency or the value of assets and liabilities to reflect their true value.

Zebrafish

A small freshwater fish often used in scientific research due to its genetic similarities to humans.