Suppose You Are Working with Two Factor Portfolios,Portfolio 1 and Portfolio

question 6

Multiple Choice

Suppose you are working with two factor portfolios,Portfolio 1 and Portfolio 2.The portfolios have expected returns of 15% and 6%,respectively.Based on this information,what would be the expected return on well-diversified portfolio A,if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.

• A)15.2%
• B)14.1%
• C)13.3%
• D)10.7%
• E)8.4%

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Definitions:

Reciprocal Determinism

A concept in psychology stating that a person's behavior is both influenced by and influences their personal factors and environment.

Cycle of Rejection

A pattern where initial rejection leads to behaviors that increase the likelihood of further rejection, creating a self-perpetuating cycle.

Mistrust

A lack of trust or confidence in someone or something, often stemming from negative experiences or perceptions.

Personality Traits

Stable characteristics that define an individual's behaviors, thoughts, and feelings, distinguishing one person from another.