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

question 15

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. The portfolio that achieves this has 50 percent in stock X, -100 percent in stock Y, and 50 percent in stock Z. The weighted exposure to risk factor 2 for stocks X, Y, and Z are

• A) 0.50, -1.0, 0.50.
• B) -0.50, 1.0, -0.50.
• C) 0.60, -0.85, 0.25.
• D) F-0.275, 0.10, 0.175.
• E) 0.40, -0.75, 0.25.

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Definitions:

Ventral Side

The front or belly side of an organism in anatomical positions, opposite to the dorsal side.

Shoulder Blade

Also known as the scapula, it is the bone that connects the humerus (upper arm bone) with the clavicle (collar bone).

Physiology

The branch of biology that deals with the normal functions of living organisms and their parts, including the physical and chemical processes involved.

Levels of Organization

A hierarchical structure for organizing complexity in biology, ranging from atoms to molecules, cells, tissues, organs, organ systems, organisms, populations, communities, ecosystems, and the biosphere.