Consider the Single Factor APT

question 55

Multiple Choice

Consider the single factor APT. Portfolio A has a beta of 0.2 and an expected return of 13%. Portfolio B has a beta of 0.4 and an expected return of 15%. The risk-free rate of return is 10%. 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

---

Definitions:

In-Group

A social group with a strong sense of togetherness, from which others are excluded.

Identifies

Recognizes, categorizes, or associates something as being a particular type or belonging to a specific group.

Prejudice

Attitudes (usually negative) toward others based on their gender, religion, race, or membership in a particular group.

Discrimination

Unfair treatment of individuals or groups based on characteristics such as race, gender, disability, or age.