Q1: supposed that you know that next year prices for the three stocks Padini, May Bank and Proton Bhd. will actually be RM8.50, RM8.3 and RM8.7, respectively. Create and demonstrate a riskless, arbitrage investment to take advantage of these misprices securities. What is the profit from your investment? Note that you may assume that you can use the proceeds from any necessary short sale.

Q2:

If the rate of return on a zero-systematic risk asset (g) _ 3%, EX (1) = 4% and INF (24) = 6%. what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for RMS and will pay RMO.5 dividend in the next year.