Suppose You Are Working with Two Factor Portfolios, Portfolio 1

question 63

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%
• E) 8.4%

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Definitions:

Secondary Socialization

The process of learning appropriate behavior within smaller sections of the larger society, occurring after primary socialization.

Resocialization

The process by which individuals learn new norms, values, and behaviors, replacing those from a previous social context, often occurring in radically different or new environments.

Childhood

The period of a person's life from birth to adolescence, characterized by rapid physical growth, development, and learning.

Adolescence

The transitional stage of physical and psychological development that generally occurs during the period from puberty to legal adulthood.