Consider the Multifactor APT

question 30

Multiple Choice

Consider the multifactor APT.The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%,respectively.The risk-free rate of return is 10%.Stock A has an expected return of 19% and a beta on factor 1 of 0.8.Stock A has a beta on factor 2 of ________.

• A)1.33
• B)1.50
• C)1.67
• D)2.00
• E)none of the above

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Definitions:

Determination

In statistics, determination often refers to the coefficient of determination, which measures the proportion of variance in a dependent variable predictable from an independent variable.

Estimated Regression

A statistical method used to predict the value of a dependent variable based on the values of one or more independent variables.

SSR

Sum of Squares due to Regression, a measure in statistics used to quantify the variance explained by a regression model.