An Analyst Develops Her APT Asset Pricing Line and Finds

question 32

Multiple Choice

An analyst develops her APT asset pricing line and finds that Securities A and B both have the same factor sensitivity. A lies above the line; B lies below the line. She should

• A) buy B and sell an equal amount of A.
• B) sell B and hold A.
• C) buy A and sell an equal amount of B.
• D) buy A and hold B.

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Definitions:

Red Tides

Algal blooms that turn coastal waters red and are harmful to marine life due to the toxins produced by the algae.

Red Algae

A diverse group of eukaryotic, photosynthetic algae, often found in marine environments, known for their reddish pigments.

Red Algal Ancestor

The ancient progenitor of current red algae species, suggesting a common lineage from which modern red algae have evolved.

Land Plants

Organisms that are part of the kingdom Plantae, characterized by their ability to perform photosynthesis and live predominantly on land.