Consider a Well-Diversified Portfolio, A, in a Two-Factor Economy

question 31

Multiple Choice

Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 5%, the risk premium on the first-factor portfolio is 4%, and the risk premium on the second-factor portfolio is 6%. If portfolio A has a beta of 0.6 on the first factor and 1.8 on the second factor, what is its expected return?

• A) 7.0%
• B) 8.0%
• C) 18.2%
• D) 13.0%
• E) 13.2%

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Definitions:

Top-Down Leadership

A leadership approach where decisions and directives originate from the higher levels of an organization's hierarchy and flow down to the lower levels.

Political Support

Backing or endorsement from political entities or figures, often used to gain leverage or influence.

Individual Resistance

Opposition or reluctance by individuals to accept change or adapt to new situations, often due to personal reasons or fear of the unknown.

Perceptions

The process of interpreting and understanding sensory information, which influences how individuals make sense of the world around them.