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Finance Assignment/ Professional Essay Writers

Suppose the three stocks (A, B, and C) and two common risk factors (1 and 2) have the following relationship:E(Ra)= (1.1)a1+(0.8)a2E(Ra)=(0.7)a1+(0.6)a2E(Rc)=(0.3)a1+ (0.6)a2a) if a1= 4% and A2=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 pay a dividend in the next year.b) Suppose that you know that next year the prices for stocks A, B, and C will actually be $31.50, $35 and $30.50. Create and demonstrate a riskless, arbitrage investment to take advantage of these mispriced securities. What is the profit of your investment?

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