Consider a Single Factor APT

question 46

Multiple Choice

Consider a single factor APT. Portfolio A has a beta of 1.0 and an expected return of 16%. Portfolio B has a beta of 0.8 and an expected return of 12%. The risk-free rate of return is 6%. 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
• E) A; the riskless asset

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Definitions:

Slow-Wave Sleep

A deep sleep stage characterized by low frequency, high amplitude brain waves, essential for restorative sleep and memory consolidation.

Creative Insights

Refers to the ability to gain an understanding or develop an idea through innovative and novel thinking.

Night Terrors

A sleep disorder causing feelings of terror or dread, typically occurring in the non-REM sleep phases, often accompanied by screaming or flailing and with little to no recollection of the dream content upon waking.

Nightmares

Distressing dreams that wake the sleeper, often involving feelings of fear, anxiety, or sorrow.