Consider a Single Factor APT

question 46

Multiple Choice

Consider a single factor APT. Portfolio A has a beta of 1.0 and an expected return of 16%. Portfolio B has a beta of 0.8 and an expected return of 12%. The risk-free rate of return is 6%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _______.

• A) A; A
• B) A; B
• C) B; A
• D) B; B
• E) A; the riskless asset

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Definitions:

Job Enrichment

A management concept focused on redesigning jobs in a way that increases the responsibilities, and opportunities for personal growth and recognition, thereby making them more fulfilling.

Adds Variety

Introduces diversity and difference, making situations, tasks, or environments more interesting and less monotonous.

Prosocial Motivation

The desire to benefit others or contribute to the greater good through one’s actions and behaviors.

Self-oriented Role

A function or position within a group or team that focuses on personal growth, achievements, and responsibilities rather than collaborative goals.