Refer to the Following Information

question 14

Multiple Choice

Refer to the following information. Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (λ₀) = 0.025 and the risk premiums for the two factors are (λ₁) = 0.12 and (λ₀) = 0.10.
Stock Factor 1 b_i1 Factor 2 b_i2
Calculate the expected returns for stocks A, B, 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:

Recess

A period of time when proceedings or activities are temporarily suspended, often used in educational settings for breaks.

Misbehaved

Exhibiting behavior that is not acceptable based on societal or situational norms.

Cognitive-Behavioral Therapy

A therapeutic approach that addresses dysfunctional emotions, behaviors, and cognitions through goal-oriented, systematic procedures.

Aggressive Impulses

Refers to strong feelings or urges to act out in aggression or hostility.