Consider the One-Factor APT

question 1

Multiple Choice

Consider the one-factor APT. Assume that two portfolios, A and B, are well diversified. The betas of portfolios A and B are 1.0 and 1.5, respectively. The expected returns on portfolios A and B are 19% and 24%, respectively. Assuming no arbitrage opportunities exist, the risk-free rate of return must be

• A) 4.0%.
• B) 9.0%.
• C) 14.0%.
• D) 16.5%.

---

Definitions:

Depressed People

Individuals experiencing a state of low mood and aversion to activity, affecting their thoughts, behavior, feelings, and sense of well-being.

Parents

Guardians or caretakers who are responsible for raising and nurturing a child, providing emotional, financial, and educational support.

Recalled

Being brought back into awareness or action, often used in the context of remembering something or removing a product from the market.

Priming

A technique in psychology used to train people's memory both in positive and negative ways outside of their consciousness.