Question 21 Consider the table below, which gives historical returns on stock A and the Not yet market: answered Year Market Stock A return Marked out of Return 2.0000 2017 .10 .16 P Flag question 2018 .15 .22 2019 .17 .28 Assume that the returns above can be used to estimate distribution of future returns and the annual risk-free rate is 1.7%. Answer next 4 questions (2 MARKS) What are the expected rates of return on stock A and the market? O a. E(rA)=21%, E(TM)=14% O b. E(rA)=22%, E(M)=14% O c. E(rA)=23%, E(TM)=14% O d. E(rA)=20%, E(rM)=11% O e. E(TA)=22%, E(rM)=13% Question 22 (3 MARKS) What is the variance of stock market returns? Not yet answered a. 0.0867 Marked out of O b. 13 (%) 3.0000 Flag question C. 0.13 O d. 26 (%)2 O e. 8.67 (%) Question 23 (3 MARKS) What is the beta of stock A? Not yet answered O a. 0.619 Marked out of O b. 0.887 3.0000 O c. 1.615 Flag question O d. -1.615 O e. None of the above Question 24 (3 MARKS) What is the best trading strategy for stock A if investors believe that CAPM should hold most of the time? Not yet answered O a. An investor should short stock A Marked out of 3.0000 O b. An investor should find an arbitrage strategy with stock A Flag question O c. An investor should buy stock A d. The best strategy cannot be found e. An investor should ignore stock A