USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the Three

question 150

Multiple Choice

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) .
The zero-beta return ( $\lambda$ 0) = 3 percent, and the risk premia are $\lambda$ 1 = 10 percent and $\lambda$ 2 = 8 percent. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 7.9. The expected returns for stock X, stock Y, and stock Z are

• A) 3 percent, 8 percent, 10 percent
• B) 7.1 percent, 10.5 percent, 8.8 percent
• C) 7.1 percent, 8.8 percent, 10.5 percent
• D) 10 percent, 5.5 percent, 14 percent
• E) 14 percent, 5.5 percent, 12 percent

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Definitions:

Amygdala

A small, almond-shaped set of neurons located deep within the temporal lobe of the brain, involved in processing emotions.

Emotional Information

Data related to feelings or affective states that can influence cognition and behavior.

Temporal Lobe

A region of the cerebral cortex located beneath the lateral fissure on both cerebral hemispheres, associated with processing auditory information and encoding memory.

Hearing

The ability to perceive sound by detecting vibrations through an organ such as the ear.