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:

Mathematical Reasoning

The ability to use logical and critical thinking to solve mathematical problems and to understand concepts beyond mere computation.

Spatial Reasoning

The ability to understand and remember the spatial relations among objects.

Linguistic Inferences

The process of using information within language and prior knowledge to fill in gaps and understand meaning beyond the explicit information provided.

Literal Interpretations

Literal interpretations involve understanding words or phrases in their most basic, straightforward sense without inference, metaphor, or exaggeration.