Consider the Single-Factor APT

question 5

Multiple Choice

Consider the single-factor APT. Stocks A and B have expected returns of 12% and 14%, respectively. The risk-free rate of return is 5%. Stock B has a beta of 1.2. If arbitrage opportunities are ruled out, stock A has a beta of

• A) 0.67.
• B) 0.93.
• C) 1.30.
• D) 1.69.

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Definitions:

Syntax

The set of rules, principles, and processes that govern the structure of sentences in a given language, particularly the order of words and phrases.

Phonology

The study of the sound system in languages, including the rules for their sequence and structure.

Morpheme

The smallest grammatical unit in a language that has semantic meaning.

Anthropologist Benjamin Whorf

A linguist and anthropologist known for his hypothesis that the structure of a language affects its speakers' cognition and worldview.