Consider the Single Factor APT

question 22

Multiple Choice

Consider the single factor APT.Portfolio A has a beta of 1.3 and an expected return of 21%.Portfolio B has a beta of 0.7 and an expected return of 17%.The risk-free rate of return is 8%.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:

Jaundice

A medical condition characterized by the yellowing of the skin and eyes, often due to elevated bilirubin levels, indicating liver or bile duct issues.

Genital Candidiasis

A yeast infection of the genital area, typically caused by the fungus Candida albicans.

Oral Contraceptives

Birth control pills taken by mouth that contain hormones to prevent pregnancy by inhibiting ovulation, thickening cervical mucus, or altering the uterine lining.

High Vitamin Doses

Consumption of vitamin D in quantities significantly above the recommended dietary allowance.