Under the following conditions,what are the expected returns for stocks A and C?
$\begin{array}{ll}
\lambda^{0}=0.07 & b_{\mathrm{a}, 1}=0.92 \
k_{1}=0.04 & b_{\mathrm{a}, 2}=1.10 \
\mathrm{k}_{2}=0.03 & \mathrm{~b}_{\mathrm{c}, 1}=1.16 \
& \mathrm{~b}_{\mathrm{c}, 2}=2.35
\end{array}$
A) 14.1% and 17.65%
B) 14.1% and 18.45%
C) 17.65% and 18.45%
D) 18.45% and 17.52%
E) None of the above

Question

Quizplus · Accepted Answer

$$\begin{aligned}
R _ { \mathbf { a } } & = \boldsymbol { \lambda } ^ { 0 } + \left( \mathrm { b } _ { 1,1 } \right) \left( \mathbf { k } _ { 1 } \right) + \left( \mathrm { b } _ { 1,2 } \right) \left( \mathbf { k } _ { 2 } \right) \
& = 0.07 + ( 0.95 ) ( 0.04 ) + ( 1.1 ) ( 0.03 ) \
& = 14.10 \%
\end{aligned}$$ $$\begin{aligned}
R _ { \mathbf { t } } & = \lambda ^ { 0 } + \left( \mathrm { b } _ { \mathrm {c } , 1 } \right) \left( \mathbf { k } _ { 1 } \right) + \left( \mathrm { b } _ { \mathrm { c} , 2 } \right) \left( \mathbf { k } _ { \mathrm { q } } \right) \
& = 0.07 + ( 1.1 ) ( 0.04 ) + ( 2.35 ) ( 0.03 ) \
& = 18.45 \%
\end{aligned}$$

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