Consider the One-Factor APT

question 61

Multiple Choice

Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately

• A) 3.6%.
• B) 6.0%.
• C) 7.3%.
• D) 10.1%.

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