Ch 03: Assignment - Risk and Return: Part II Attention: Due to a bug in Google Chrome, this page may not function correctly. Click nere to learn more. 9. The Arbitrage Pricing Theory Aa Aa Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. The APT is more restrictive than the Capital Asset Pricing Model (CAPM). The APT does not restrict the number or nature of the factors relevant to the determination of a stock's return. The APT does not identify the relevant factors. The APT assumes that all investors hold the market portfolio. Emily, an analyst at Fantasy Partners (FP), models the company's stock assuming that all stocks' returns depend on only three risk factors: inflation, industrial production, and the aggregate degree of risk aversion. The risk-free rate is PRE = 8%, the return on the market is r = 10%, and the rest of the available data is given in the following table: Value 8% 12% 5% Variable The required rate of return on an inflation portfolio, The required return on an industrial production portfolio, r2 The required return on a risk-bearing portfolio, 13 Factor sensitivity to the inflation portfolio, bi Factor sensitivity to the industrial production portfolio, b2 Factor sensitivity to the risk-bearing portfolio, B3 Fantasy Partners's beta, bep -0.5 0.4 1.1 2.0 Using the APT model, Emily calculates that FP's required rate of return is If Emily used the Capital Asset Pricing Model, she would have calculated that FP's required rate of return is