Exhibit 4.2 USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S) X X Jan. 13, 2005 Jan. 14, 2005 Jan. 15, 2005 Jan. 16, 2005 20 25 27 20 Stock Price Y 40 42 45 40 z 30 18 8 10 1000 1000 1000** 3000 # Shares Y 2000 2000 2000 2000 Z 1000* 2000 2000 2000 *2:1 Split on Stock Z after Close on Jan. 13, 2005 **3:1 Split on Stock X after Close on Jan. 15, 2005 The base date for index calculations is January 13, 2005 61. Refer to Exhibit 4.2. Calculate a value weighted index for January 16th if the initial index value is 100. a. 123.07 b. 100.00 c. 102.31 d. 111.54 e. 121.32 Exhibit 7.9 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). Stock X Factor 1 Loading -0.55 -0.10 0.35 Factor 2 Loading 1.2 0.85 0.5 Y Z The zero-beta return (20) = 3 percent, and the risk premia are j = 10 percent and 12 = 8 percent. Assume that all three stocks are currently priced at $50. 64. Refer to Exhibit 7.9. Assume that you wish to create a portfolio with no net wealth invested and the portfolio that achieves this has 50 percent in stock X, -100 percent in stock Y, and 50 percent in stock Z. The net arbitrage profit is a. $8. b. $5. c. $7. d. $12. e. $15