Problem 7-12 Suppose that three stocks (A, B, and C) and two common risk factors (1 and 2) have the following relationship: E(RA) = (1.0)41 + (0.7)12 E(RB) = (0.6)41 + (0.5)12 E(RC) = (0.2)/1 + (0.3)12 a. If 11 = 2% and 12 = 4%, what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for $40 and will not pay dividend in the next year. Do not round intermediate calculations. Round your answers to the nearest cent. Expected price for Stock A: $ Expected price for Stock B: $ Expected price for Stock C: $ | b. Suppose that you know that next year the prices for Stocks A, B, and C will actually be $42.81, $45.58, and $40.79. Assume that you can use the proceeds from any necessary short sale. Determine the riskless, arbitrage investment to take advantage of these mispriced securities. In order to create a riskless arbitrage investment, an investor would -Select- ^ a riskless arbitrage investment. What is the profit from your investment? Round your answer to the nearest cent. Problem 7-12 Suppose that three stocks (A, B, and C) and two common risk factors (1 and 2) have the following relationship: E(RA) = (1.0)41 + (0.7)12 E(RB) = (0.6)41 + (0.5)12 E(RC) = (0.2)/1 + (0.3)12 a. If 11 = 2% and 12 = 4%, what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for $40 and will not pay dividend in the next year. Do not round intermediate calculations. Round your answers to the nearest cent. Expected price for Stock A: $ Expected price for Stock B: $ Expected price for Stock C: $ | b. Suppose that you know that next year the prices for Stocks A, B, and C will actually be $42.81, $45.58, and $40.79. Assume that you can use the proceeds from any necessary short sale. Determine the riskless, arbitrage investment to take advantage of these mispriced securities. In order to create a riskless arbitrage investment, an investor would -Select- ^ a riskless arbitrage investment. What is the profit from your investment? Round your answer to the nearest cent