USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM You expect the risk free rate (RFR) to be 3 percent and the market return to be 8 percent You also have the following information about three stocks Current Expected Expected Stock Beta Price Price Dividend X 1 25 $20 $23 $1 25 Y 1 50 $27 $29 $0 25 Z 0 90 $35 $38 $1 00 Refer to Exhibit 7 2 What is your investment strategy concerning the three stocks a buy X, Y, and Z b sell X, Y, and Z c buy X and Y sell Z d buy X and Z sell Y e sell X and Z buy Y

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Question: USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.

		Current	Expected	Expected
Stock	Beta	Price	Price	Dividend
X	1.25	$20	$23	$1.25
Y	1.50	$27	$29	$0.25
Z	0.90	$35	$38	$1.00

Refer to Exhibit 7.2. What is your investment strategy concerning the three stocks?

a. buy X, Y, and Z

b. sell X, Y, and Z

c. buy X and Y; sell Z

d. buy X and Z; sell Y

e. sell X and Z; buy Y

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