Exhibit 92
Use the Information Below for the Following Problem(S)
Consider

Multiple Choice

Exhibit 9.2
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) .
$$\begin{array} { c c c } \text { Stack } & \text { Factor 1 Londine } & \text { Factor } 2 \text { Londing } \\\hline X & - [ .55 & 1.2 \\Y & - [ .10 & 0.85 \\Z & 0.35 & 0.5\end{array}$$
The zero-beta return (??) = 3%, and the risk premia are ?? = 10%, ?? = 8%. Assume that all three stocks are currently priced at $50.
-Refer to Exhibit 9.2.Assume that you wish to create a portfolio with no net wealth invested and the portfolio that achieves this has 50% in stock X,-100% in stock Y,and 50% in stock Z.The net arbitrage profit is

A) $8
B) $5
C) $7
D) $12
E) $15