Question: PLEASE ANSWER ALL QUESTIONS Suppose that three stocks (A, B, and C) and two common risk factors ( 1 and 2 ) have the following

PLEASE ANSWER ALL QUESTIONS

Suppose that three stocks (A, B, and C) and two common risk factors ( 1 and 2 ) have the following relationship: E(Rc)=(1.1)M1+(0.8)2E(Rs)=(0.6)M1+(0.5)2E(RC)=(0.1)M1+(0.2)2 a. It A1=3% and 2=2%, what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for $30 and will not pry dividend in the next year, Do not round intermediate calculations, found your answers to the nearest cent. Expected price for 5 tock A: $ Expected price for Stock B: $ Expected price for 5 tock Ci 5 b. Suppose that yyu know that next year the prices for Stocks A,D, and C will actually be $40.97,344.17, and 340.34, Assume that you can use the preceeds from any necessary shortsale. Determine the riskless, arbitrage invertment to take advantaae of these misoriced securities. In order to create a riskless arbitrage investment, an imestor would I riskless arbitrage ifivestmene. What is the profit from your investment? Pound your answer to the neerest cent

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