USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A $\lambda$

question 13

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return ( $\lambda$ 0) = .025 and the risk premiums for the two factors are ( $\lambda$ 1) = .12 and ( $\lambda$ 0) = .10.

-Refer to Exhibit 7.10. Calculate the expected returns for stocks A, B, and C. A B C

• A) 0.082 0.091 0.033
• B) 0.105 0.109 0.032
• C) 0.132 0.128 0.033
• D) 0.165 0.121 0.032
• E) 0.850 0.850 0.610

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Definitions:

Worksheet

A paper or electronic document used to organize and simplify accounting information before the preparation of financial statements.

Owner's Drawings

Withdrawals of business assets by the owner for personal use.

Income Summary

An account in which revenues and expenses are summarized, showing the net income or loss for a specific period before closing entries are made.

Net Income

Net income is the total revenue minus total expenses of a business, showing the company's profit during a specific period.