Exhibit 7-9
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 10

Multiple Choice

Exhibit 7-9
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (λ₀) = .025 and the risk premiums for the two factors are (λ₁) = .12 and (λ₀) = .10.
$\begin{array}{ccc}\text { Stock } & \text { Factor } 1 b_{i l} & \text { Factor } 2 b_{i 2} \\\hline \text { A } & -0.25 & 1.1 \\\text { B } & -0.05 & 0.9 \\\text { C } & 0.01 & 0.6\end{array}$
-Refer to Exhibit 7-9. Calculate the expected returns for stocks A, B, C. $\begin{array}{lccc} & \mathrm{A} & \mathrm{B} & \mathrm{C} \\\hline \text { I. } & 0.082 & 0.091 & 0.033 \\\text { II. } & 0.105 & 0.109 & 0.032 \\\text { III. } & 0.132 & 0.128 & 0.033 \\\text { IV. } & 0.165 & 0.121 & 0.032 \\\text { V. } & 0.850 & 0.850 & 0.610\end{array}$

• A) I
• B) II
• C) III
• D) IV
• E) V

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Definitions:

Emotions Universal

The theory that certain emotions are experienced by all humans regardless of culture or background.

Preceded by Cognition

Indicates that a thought process or mental activity occurs before a specific action or behavior.

Facial Feedback Hypothesis

Suggests that facial movements can influence emotional experiences.

Feedback from Facial Muscles

The sensory input and psychological effects that result from the movements and configurations of the muscles in the face.