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

question 57

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. Assume that you wish to create a portfolio with no net wealth invested and the portfolio that achieves this has 50 percent in stock X, -100 percent in stock Y, and 50 percent in stock Z. The net arbitrage profit is

• A) $8.
• B) $5.
• C) $7.
• D) $12.
• E) $15.

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Definitions:

Setback

An event that delays progress or causes problems, often temporary, requiring adaptation or change in plans.

Feeling

An emotional state or reaction that can be influenced by thoughts, behaviors, and physical conditions.

Social Responsibility

The ethical framework suggesting that an entity, be it an organization or individual, has an obligation to act for the benefit of society at large.

Impulse Control

Impulse control is the ability to resist or delay an immediate reaction or temptation, in order to achieve a more beneficial outcome.