Consider the Single Factor APT

question 22

Multiple Choice

Consider the single factor APT.Portfolio A has a beta of 1.3 and an expected return of 21%.Portfolio B has a beta of 0.7 and an expected return of 17%.The risk-free rate of return is 8%.If you wanted to take advantage of an arbitrage opportunity,you should take a short position in portfolio __________ and a long position in portfolio _________.

• A) A, A
• B) A, B
• C) B, A
• D) B, B

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