Consider the Single-Factor APT

question 14

Multiple Choice

Consider the single-factor APT.Stocks A and B have expected returns of 12% and 14%,respectively.The risk-free rate of return is 5%.Stock B has a beta of 1.2.If arbitrage opportunities are ruled out,stock A has a beta of __________.

• A)0.67
• B)0.93
• C)1.30
• D)1.69
• E)none of the above

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Definitions:

Wealth Redistribution

The transfer of income and wealth from certain individuals or groups to others through mechanisms like taxation, charity, or welfare policies, aiming at economic equality.

Mandated By Law

Requirements or actions that are legally imposed and regulated by legislation, which individuals or entities must comply with.

Host-Based Pay

Expatriate pay comparable to that earned by employees in a host country.

Skill-Based Pay

A compensation system that sets pay levels based on the skills or knowledge an employee possesses, rather than their job title or position.