Consider the Multifactor APT

question 55

Multiple Choice

Consider the multifactor APT.There are two independent economic factors, F₁ and F₂.The risk-free rate of return is 6%.The following information is available about two well-diversified portfolios: Assuming no arbitrage opportunities exist, the risk premium on the factor F₂ portfolio should be

• A)3%.
• B)4%.
• C)5%.
• D)6%.

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Definitions:

Force Majeure Clause

A contract provision that frees parties from liability or obligation when an extraordinary event or circumstance beyond their control occurs.

Commercial Arbitration

A form of arbitration to resolve business disputes outside the courts, where the parties involved appoint an arbitrator(s).

Commercial Invoice

A document used in international trade that details the price, type, and quantity of goods shipped, serving as a demand for payment.