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

---

Definitions:

Anima and Animus

Jungian concepts referring to the unconscious feminine side of a man (anima) and the unconscious masculine side of a woman (animus) that influence their behavior.

Ego

A component of the human psyche in psychoanalytic theory that mediates between the conscious, the unconscious, and the external world.

Extraverted Thinking Types

Personality types characterized by decision-making processes that focus on external criteria and logical reasoning.

Introverted Feeling Types

Individuals who primarily make decisions based on deeply held personal values and emotions; typically introspective, sensitive, and reserved in nature.