Consider the One-Factor APT

question 56

Multiple Choice

Consider the one-factor APT. The variance of returns on the factor portfolio is 9. The beta of a well-diversified portfolio on the factor is 1.25. The variance of returns on the well-diversified portfolio is approximately

• A) 3.6.
• B) 6.0.
• C) 7.3.
• D) 14.1.

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Definitions:

Social Dilemmas

Situations in which individual self-interest conflicts with collective interest, leading to challenging decisions.

Crises of Trust

Situations where the foundational beliefs in the reliability, truth, ability, or strength of someone or something are severely challenged or broken.

Short-Term Personal Gain

Immediate benefits or advantages secured by an individual, often disregarding long-term consequences or ethical considerations.

Long-Term Good

The benefits or positive outcomes that are realized over an extended period.