Consider the Multifactor APT

question 18

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 F₁ portfolio should be

• A)3%.
• B)4%.
• C)5%.
• D)6%.

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