Consider the One-Factor APT

question 16

Multiple Choice

Consider the one-factor APT.The variance of returns on the factor portfolio is 6%.The beta of a well-diversified portfolio on the factor is 1.1.The variance of returns on the well-diversified portfolio is approximately __________.

• A)3.6%
• B)6.0%
• C)7.3%
• D)10.1%
• E)none of the above

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Definitions:

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