Marion and Birkan (I $\mathrm{M}$ And B Will Recommend Short-Selling the Asset
C) M Will

question 17

Multiple Choice

Marion and Birkan (i.e.M and B) are aspiring young investment students.During the lecture on asset pricing,both were inspired by the beauty of the models presented.M found the CAPM model overly simplistic and favoured the Fama-French model,while B disagreed,and instead believed that the CAPM,being more theoretical,was the better model.As part of a class assignment,they were each given the tabled information regarding an asset and asked to recommend a trading strategy based upon their preferred asset pricing model.If the asset is observed in the market trading with an expected return of 28%,and the risk-free rate is 8%,what are the relative trading strategy recommendations of each investor?

• A) Both M and B will recommend buying the asset
• B) Both \( \mathrm{M} \) and B will recommend short-selling the asset
• C) M will recommend buying the asset, while B will recommend short-selling the asset
• D) B will recommend buying the asset, while M will recommend short-selling the asset

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Definitions:

External World

The reality existing outside an individual's mind, perceived through the senses.

Aristophanes

Aristophanes was an ancient Greek playwright known for his comic plays, which critically examined social, political, and cultural topics of Athens.

Completion

The state or condition of being completed, where all required or planned parts, elements, or steps have been accomplished or fulfilled.

Other Half

Often refers to a concept in Platonic philosophy where each soul is divided and seeks its counterpart to become whole.