Assume the Single-Factor APT Model Applies and a Portfolio Exists

question 39

Multiple Choice

Assume the single-factor APT model applies and a portfolio exists such that half of the funds are invested in risky Security Q and the rest in a risk-free asset.Security Q has a beta of 1.8.The portfolio has a factor beta of:

• A)0.
• B).8.
• C).9.
• D)1.
• E)1.8.

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Definitions:

Depreciation Expense

Depreciation expense is the charge recognized in each accounting period for the cost of an asset's decline in value due to use or obsolescence over time.

Residual Value

The estimated value of an asset at the end of its useful life, relevant in depreciation calculations and lease contracts.

150%-Declining-Balance

A method of accelerated depreciation which computes depreciation expense at 150% of the straight-line rate.

Depreciation

The accounting method of allocating the cost of a tangible or physical asset over its useful life.