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:

Diversity

The presence of a wide range of variation in qualities or attributes within a group, organization, or society.

Management Influences

The impact that leadership and managerial practices have on the direction, productivity, and morale of an organization or team.

Innovation Process

The sequence of activities involved in the development, prototyping, and implementation of new ideas, products, or technologies.

Organizations

Entities where multiple individuals gather to achieve common goals through a structured framework and coordinated activities.