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A stock analyst has come to the conclusion that three stocks have the following characteristics: Stock Expected Return Beta X 3% 0.20 Y 4% 0.50

A stock analyst has come to the conclusion that three stocks have the following characteristics:

Stock Expected Return Beta

X 3% 0.20

Y 4% 0.50

Z 9% 1.20

16. Given this information, the analyst should recommend:

(A) buying a portfolio that has a 45% weight on X, and 55% on Y, while selling (short)

the same dollar amount of Z.

(B) selling (short) a portfolio that has a 45% weight on X, and 55% on Y, while buying

the same dollar amount of Z.

(C) buying a portfolio that has a 70% weight on X and 30% on Z, while selling (short)

the same dollar amount of Y.

(D) selling (short) a portfolio that has a 70% weight on X and 30% on Z, while buying

the same dollar amount of Y.

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