Exhibit 7-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

Exhibit 7-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
You expect the risk-free rate (RFR) to be 3% and the market return to be 8%. You also have the following information about three stocks. $$\begin{array} { c c c c c } \text { STOCK } & \text { BETA } & \begin{array} { c } \text { CURRENT } \\\text { PRICE }\end{array} & \begin{array} { c } \text { EXPECTED } \\\text { PRICE }\end{array} & \begin{array} { c } \text { EXIPECTED } \\\text { DIVIDEND }\end{array} \\\hline \mathbf { X } & 1.25 & \$ 20 & \$ 23 & \$ 1.25 \\\mathbf { Y } & 1.50 & \$ 27 & \$ 29 & \$ 3.25 \\\mathbf { Z } & 0.90 & \$ 35 & \$ 38 & \$ 1.00\end{array}$$
-Refer to Exhibit 7-2. What is your investment strategy concerning the three stocks?

A) Buy X and Y, sell Z.
B) Sell X, Y and Z.
C) Sell X and Z, buy Y.
D) Buy X, Y and Z.
E) Buy X and Z, sell Y.