Consider the Multifactor APT

question 17

Multiple Choice

Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%, respectively. The risk-free rate of return is 10%. Stock A has an expected return of 19% and a beta on factor 1 of 0.8. Stock A has a beta on factor 2 of

• A) 1.33.
• B) 1.50.
• C) 1.67.
• D) 2.00.

---

Definitions:

Change

The process through which something becomes different, often leading to new ways of thinking, behaving, or operating.

Enlightenment

A philosophical movement of the 18th century emphasizing individualism, reason, and skepticism towards traditional doctrines.

Natural Laws

A body of unchanging moral principles regarded as a basis for all human conduct.

Human Good

Pertains to what is considered beneficial, desirable, or valuable from a moral or welfare perspective, leading to the well-being and flourishing of individuals and communities.