Consider the One-Factor APT

question 23

Multiple Choice

Consider the one-factor APT.Assume that two portfolios,A and B,are well diversified.The betas of portfolios A and B are 1.0 and 1.5,respectively.The expected returns on portfolios A and B are 19% and 24%,respectively.Assuming no arbitrage opportunities exist,the risk-free rate of return must be ____________.

• A)4.0%
• B)9.0%
• C)14.0%
• D)16.5%
• E)none of the above

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Definitions:

Intractable Epilepsy

A form of epilepsy that is resistant to treatment, where patients do not achieve seizure control through medication.

Primary Motor Area

A part of the frontal lobe in the brain responsible for the execution of voluntary movements by sending signals to skeletal muscles.

Neuron

A specialized cell transmitting nerve impulses; the basic building block of the nervous system.

Lateralized

Refers to the tendency for some neural functions or cognitive processes to be more dominant in one hemisphere of the brain than the other.