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

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