Consider the Multifactor Model APT with Two Factors

question 27

Multiple Choice

Consider the multifactor model APT with two factors. Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor-1 and factor-2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The expected return on portfolio A is __________ if no arbitrage opportunities exist.

• A) 13.5%
• B) 15.0%
• C) 16.5%
• D) 23.0%

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Definitions:

High Self-esteem

The positive perception and valuation of oneself, characterized by confidence in one's abilities and worth.

Cognitive Development

The process by which individuals acquire and develop the ability to think, reason, and understand.

Internal Working Models

Mental representations of attachment relationships that guide individuals' expectations and interactions in relationships.

Infant Attachment

The emotional bond that develops between an infant and their primary caregiver, influencing personality development.