Consider the Multi-Factor APT with Two Factors

question 71

Multiple Choice

Consider the multi-factor APT with two factors.Portfolio A has a beta of 0.5 on factor 1 and a beta of 1.25 on factor 2.The risk premiums on the factors 1 and 2 portfolios are 1% and 7% respectively.The risk-free rate of return is 7%.The expected return on portfolio A is __________ if no arbitrage opportunities exist.

• A) 13.5%
• B) 15.0%
• C) 16.25%
• D) 23.0%

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Definitions:

Solid State

A semiconductor circuit or device.

Solenoid

An electromagnetic device consisting of a coil and armature designed to perform mechanical work when energized. Used in just about every electrical circuit on modern vehicles, whether it be in the starter circuit, transmission, or door locks.

Thermistor

A temperature sensing device used in various electronic circuits in a truck chassis. Consists of a variable resistor, the variance of which correlates with temperature. When supplied with a reference voltage (V-Ref), some of the supply voltage is returned as a signal from which temperature can be calculated. Most truck electrical circuits use negative temperature coefficient (NTC) thermistors in which resistance drops as temperature increases, meaning that the signal voltage increases with temperature rise.

Temperature

A physical quantity expressing the subjective perceptions of hot and cold, measured by thermometers which can translate various physical phenomena into numerical values.