Assume That the Single Factor APT Model Applies and a Portfolio

question 13

Multiple Choice

Assume that the single factor APT model applies and a portfolio exists such that 2/3 of the funds are invested in Security Q and the rest in the risk-free asset.Security Q has a beta of 1.5.The
Portfolio has a beta of:

• A)0.00
• B)0.50
• C)0.75
• D)1.00
• E)1.50

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Definitions:

Numerical Terms

Mathematical expressions or figures used to describe quantity, order, or relationships between amounts in data or calculations.

Sensitive

Quick to detect or respond to slight changes, signals, or influences.

Sunk Cost

A cost that has already been incurred and cannot be recovered.

Differential Cost

The difference in cost between two alternative decisions or scenarios, important in the process of making financial decisions.