Consider the One-Factor APT

question 61

Multiple Choice

Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately

• A) 3.6%.
• B) 6.0%.
• C) 7.3%.
• D) 10.1%.

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Definitions:

Halo Effect

A type of cognitive bias where the perception of one positive quality in a person or thing leads to the attribution of other positive qualities, often unrelated.

Aggressive Behaviours

Actions intended to harm or intimidate others, expressed physically or verbally.

Artificial Setting

An environment created or controlled by researchers to simulate conditions for experiments, which might not accurately reflect natural conditions.

Independent Variable

The variable in an experiment that is manipulated or changed to observe its effects on a dependent variable.