Consider the Single-Factor APT

question 51

Multiple Choice

Consider the single-factor APT.Stocks A and B have expected returns of 15% and 18%,respectively.The risk-free rate of return is 6%.Stock B has a beta of 1.0.If arbitrage opportunities are ruled out,stock A has a beta of __________.

• A) 0.67
• B) 1.00
• C) 1.30
• D) 1.69
• E) none of these

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Definitions:

Approval

A formal or official agreement or sanction.

Reproductive Success

The passing of genes to the next generation in a way that they too can pass on those genes.

Internal State

Refers to an individual's psychological and physiological condition at a given time, which influences perceptions, emotions, and behavior.

Reduce Tension

A process or action aimed at decreasing stress or anxiety in an individual or group.