Consider the Single Factor APT

question 61

Multiple Choice

Consider the single factor APT. Portfolio A has a beta of 1.3 and an expected return of 21%. Portfolio B has a beta of .7 and an expected return of 17%. The risk-free rate of return is 8%. 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

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Definitions:

Buckley Amendment

Refers to the Family Educational Rights and Privacy Act (FERPA), a federal law that protects the privacy of student education records.

FERPA

(Family Educational Rights and Privacy Act of 1974) affirms the right of all individuals to gain access to their school records, including test records.

Reliability

The degree to which an assessment tool produces stable and consistent results over repeated applications under the same conditions.

Cronbach's Coefficient Alpha

Cronbach's Coefficient Alpha is a statistic used to assess the internal consistency or reliability of a set of scale or test items.