Consider the One-Factor APT

question 61

Multiple Choice

Consider the one-factor APT.Assume that two portfolios,A and B,are well diversified.The betas of portfolios A and B are 1.0 and 1.5,respectively.The expected returns on portfolios A and B are 19% and 24%,respectively.Assuming no arbitrage opportunities exist,the risk-free rate of return must be ____________.

• A) 4.0%
• B) 9.0%
• C) 14.0%
• D) 16.5%
• E) none of these

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