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eBook 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)1 + (0.7)2 E(RB) = (0.6)1 + (0.5)2 E(RC) = (0.8)1 + (0.6)2 If 1 = 4% and 2 = 6%, what are the prices expected next year for each of the stocks? Assume that all three stocks currently sell for $20 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: $ Suppose that you know that next year the prices for Stocks A, B, and C will actually be $42.24, $41.28, and $45.60. 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-short 1 share of A and 1 share of B, and buy 2 shares of C.short 1 share of A and 1 share of C, and buy 2 shares of B.short 1 share of B and 1 share of C, and buy 2 shares of A.short 2 shares of A and buy 1 share of C and 1 share of B.short 2 shares of C and buy 1 share of A and 1 share of B.Item 4 a riskless arbitrage investment. What is the profit from your investment? Round your answer to the nearest cent. $ Im not sure what your question "check price = 20??" means. I see they all currently sell for $20?

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