Under the following conditions,what are the expected returns for stocks A and B?
$\begin{array}{ll}
\lambda^{0}=0.035 & \mathrm{~b}_{\mathrm{a}, 1}=1.00 \
\mathrm{k}_{1}=0.05 & \mathrm{~b}_{\mathrm{a}, 2}=1.40 \
\mathrm{k}_{2}=0.06 & \mathrm{~b}_{\mathrm{b}, 1}=1.70 \
& \mathrm{~b}_{\mathrm{b}, 2}=0.62
\end{array}$

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

Question

Under the following conditions,what are the expected returns for stocks A and B?
$\begin{array}{ll}
\lambda^{0}=0.035 & \mathrm{~b}_{\mathrm{a}, 1}=1.00 \
\mathrm{k}_{1}=0.05 & \mathrm{~b}_{\mathrm{a}, 2}=1.40 \
\mathrm{k}_{2}=0.06 & \mathrm{~b}_{\mathrm{b}, 1}=1.70 \
& \mathrm{~b}_{\mathrm{b}, 2}=0.62
\end{array}$

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

Quizplus · Accepted Answer

$$\begin{aligned}
R _ { \mathbf { a } } & = \boldsymbol { \lambda } ^ { 0 } + \left( \mathrm { b } _ {a,1 } \right) \left( \mathbf { k } _ { 1 } \right) + \left( \mathrm { b } _ { a,2 } \right) \left( \mathbf { k } _ { 2 } \right) \
& = 0.035 + ( 1.0 ) ( 0.05 ) + ( 1.4 ) ( 0.06 ) \
& = 16.9 \%
\end{aligned}$$ $$\begin{array} { l } 
= \lambda ^ { 0 } + \left( \mathrm { b } _ { \mathrm { b } .1 } \right) \left( \mathbf { k } _ { 1 } \right) + \left( \mathrm { b } _ { \mathrm { b } , 2 } \right) \left( \mathbf { k } _ { 2 } \right) \
= 0.035 + ( 1.7 ) ( 0.05 ) + ( 0.65 ) ( 0.06 ) \
= 15.9 \%
\end{array}$$

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