Under the Following Conditions, What Are the Expected Returns for Stocks

question 129

Multiple Choice

Under the following conditions, what are the expected returns for stocks A and B?

$\begin{array}{ll}\lambda^{0}=0.035 & b_{a, 1}=1.00 \\k_{1}=0.05 & b_{a, 2}=1.40 \\k_{2}=0.06 & b_{b, 1}=1.70 \\&b_{b, 2}=0.65\end{array}$

• A) 14.8% and 13.8%
• B) 19.8% and 29.5%
• C) 16.0% and 19.8%
• D) 16.9% and 15.9%
• E) None of the above

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Definitions:

Globalizing Operations

The process of expanding business operations across international borders, aiming for a global presence and market.

Individualism

A cultural orientation in which people belong to loose social frameworks and their primary concern is for themselves and their families.

Social Framework

The structure of societal norms and institutions that guide and govern the behavior of individuals within a community.

Power Distance

A cultural dimension that reflects the extent to which less powerful members of organizations and institutions accept and expect that power is distributed unequally.