Consider the Single Factor APT

question 52

Multiple Choice

Consider the single factor APT. Portfolio A has a beta of 0.5 and an expected return of 12%. Portfolio B has a beta of 0.4 and an expected return of 13%. The risk-free rate of return is 5%. 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

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Definitions:

Internal Causes

Causes that originate within an individual, such as personal beliefs, emotions, or motives.

Refute

To prove a statement, theory, or argument to be wrong or false.

Stereotype Threat

The risk of confirming negative stereotypes about one's group, which can hamper performance in a variety of settings.

Intelligent

The ability to learn, understand, and apply knowledge effectively, as well as the capability to adapt to new situations and solve problems.