Consider the Multifactor APT

question 9

Multiple Choice

Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 6% and 4%, respectively. The risk-free rate of return is 4%. Stock A has an expected return of 16% and a beta on factor-1 of 1.3. Stock A has a beta on factor-2 of

• A) 1.33.
• B) 1.05.
• C) 1.67.
• D) 2.00.

---

Definitions:

Fifth Amendment

The Fifth Amendment refers to a part of the United States Constitution that provides several protections to individuals, including rights against self-incrimination and double jeopardy, and the assurance of due process.

Establishment Clause

One of two provisions in the First Amendment of the U.S. Constitution that protect citizens’ freedom of religion. It prohibits (1) the establishment of a national religion by Congress and (2) the preference of one religion over another or of religion over nonreligious philosophies in general.

First Amendment

An amendment to the U.S. Constitution protecting freedoms concerning religion, expression, assembly, and the right to petition.

Fourth Amendment

A provision in the United States Constitution that protects citizens from unreasonable searches and seizures, ensuring the right to privacy.