Consider a Single Factor APT

question 76

Multiple Choice

Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return of 22%. Portfolio B has a beta of 1.5 and an expected return of 17%. The risk-free rate of return is 4%. 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

Analyze the impact of fiscal policy on economic stability.

Explain the concept of laissez-faire and its implications on economic policy.

Recognize the significance of the Employment Act of 1946.

Understand the effects of economic contractions and expansions on government policy and vice versa.

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Definitions:

Light Adaptation

The process by which the eye adjusts to bright light conditions after being in darker settings.

Squint

A condition where the eyes do not properly align with each other when looking at an object, leading to uncoordinated eye movements.

Opponent Process Theory

A theory of color vision and visual processing that proposes color perception is controlled by the activity of two opponent systems: a blue-yellow mechanism and a red-green mechanism.

Afterimage

A visual phenomenon where an image continues to appear in one's vision after the exposure to the original image has ended.