Suppose You Are Working with Two Factor Portfolios, Portfolio 1

question 24

Multiple Choice

Suppose you are working with two factor portfolios, portfolio 1 and portfolio 2.The portfolios have expected returns of 15% and 6%, respectively.Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

• A)15.2%
• B)14.1%
• C)13.3%
• D)10.7%

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Definitions:

Children

A broad term referring to individuals from birth until the onset of puberty, characterized by rapid physical growth and development alongside significant cognitive and emotional changes.

Pancreas

An organ in the digestive and endocrine systems that produces enzymes for digestion and hormones such as insulin for regulating blood sugar levels.

Nutrients

Substances needed by organisms to survive and grow, typically obtained from food, and essential for energy, growth, and cellular repair.

Blood Glucose

The concentration of sugar in the bloodstream, crucial for energy production and metabolic functioning.