Consider the Single-Factor APT

question 5

Multiple Choice

Consider the single-factor APT. Stocks A and B have expected returns of 12% and 14%, respectively. The risk-free rate of return is 5%. Stock B has a beta of 1.2. If arbitrage opportunities are ruled out, stock A has a beta of

• A) 0.67.
• B) 0.93.
• C) 1.30.
• D) 1.69.

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Definitions:

Range

The difference between the highest and lowest values in a dataset, providing a measure of spread.

Measurements

Quantitative data obtained by measuring objects or events using standard units.

Percentile

In statistics, this term refers to the threshold under which a specific percentage of data within a collection is observed.

Interquartile Range

The difference between the 75th and 25th percentiles of a dataset, representing the spread of the middle 50% of the data.