Consider the Multifactor Model APT with Two Factors

question 75

Multiple Choice

Consider the multifactor model APT with two factors.Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2.The risk premiums on the factor 1 and factor 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) 16.5%
• D) 23.0%
• E) none of these

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Definitions:

Frequency Distribution

A statistical analysis showing the number of occurrences of each distinct value in a set of data.

Binge Drinking

The consumption of an excessive amount of alcohol in a short period of time, often defined as five or more drinks for males, and four or more drinks for females in about two hours.

Frequency Distribution

A representation, often in table or graph form, showing how often different values occur in a dataset.

Sample Work

The collection of physical or digital specimens that demonstrate an individual's skills, experience, or qualifications.