Consider the Single-Factor APT

question 5

Multiple Choice

Consider the single-factor APT. Stocks A and B have expected returns of 12% and 14%, respectively. The risk-free rate of return is 5%. Stock B has a beta of 1.2. If arbitrage opportunities are ruled out, stock A has a beta of

• A) 0.67.
• B) 0.93.
• C) 1.30.
• D) 1.69.

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Definitions:

Connective

Tissue in the body that supports, binds together, or separates other tissues or organs.

Nerve

A bundle of fibers composed of neurons through which electrical impulses are transmitted across the body.

Muscle

tissues in the body that have the ability to contract, causing movement of body parts and organs.

Cytology

The branch of biology that studies the structure, function, and life cycle of cells.