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

question 54

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 new prices now for stocks X, Y, and Z that will not allow for arbitrage profits are

• A) $53.55, $54.4, and $55.25.
• B) $45.35, $54.4, and $55.25.
• C) $55.55, $56.35, and $57.15.
• D) $50, $50, and $50.
• E) $51.35, $47.79, and $51.58.

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Definitions:

Fire Screens

Protective barriers placed in front of fireplaces to prevent sparks from escaping into the room.

FIFO Method

A method of inventory valuation where the first items placed in inventory are the first ones sold, standing for First-In, First-Out.

Ending Inventory

The total value of all goods available for sale at the end of an accounting period.

Spark Plugs

An engine component that ignites the fuel-air mixture in the combustion chamber of gasoline engines.