Question: Consider a one-factor Arbitrage Pricing Theory model. There are two well- diversified portfolios: A and B. Portfolio A's expected return is 20 percent and its

Consider a one-factor Arbitrage Pricing Theory model. There are two well-

Consider a one-factor Arbitrage Pricing Theory model. There are two well- diversified portfolios: A and B. Portfolio A's expected return is 20 percent and its BA is 0.75; Portfolio B's expected return is 10 percent and its BB is 0.25. What is the risk-free rate in the model

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Consider a one-factor Arbitrage Pricing Theory model. There are two well- diversified portfolios: A and B. Portfolio As expected return is 20 percent and its A is 0.75; Portfolio Bs expected return...

Suppose an investment bank has $ 9 0 0 billion in assets under management and a leverage ratio ( Assets / Equity ) of 2 0 to 1 . If the bank earns ( annually ) a 7 % return on its assets and pays 4 %...

Consider a one - factor Arbitrage Pricing Theory model. There are two well - diversified portfolios: A and B . Portfolio A s expected return is 2 4 percent and its beta is 0 . 6 ; Portfolio B s...

Question 1. Suppose that a two-factor model, where the factors are the stock market (Factor 1) and the growth rate of industrial production (Factor 2), correctly describes the return generating...

Question 1 In the context of a one-factor arbitrage pricing theory model, consider two assets (which represent the entirety of a small, two-asset economy). Asset one has an expected return of 10% and...

Assume that a one-factor model describes returns and that the following two well- diversified portfolios are observed Portfolio Expected Returns A B 11% 5% a) Find the equation that must describe APT...

Suppose that a two-factor model, where the factors are the market return (Factor 1) and the growth rate of industrial production (Factor 2), correctly describes the return generating processes of all...

Question 1. Suppose that a two-factor model, where the factors are the market return (Factor 1) and the growth rate of industrial production (Factor 2), correctly describes the return generating...

(a) Derive the equation for mass transfer flux in a binary gas system under equi-molar counter diffusion.. Give the graphical representation of concentration gradient. (b) In an oxygen-nitrogen gas...

Give several examples of projects found in your city, region, or countryavoiding those used as examples in the chapter.

8. Potassium aluminium sulfate is an example of a double salt. It has the formula KAl(SO),. Which of the following would be discharged at the cathode during the electrolysis of an aqueous solution of...

How can Total quality Management improve efficiency

Describe how organizational culture is being affected by having a greater percentage of women and minorities in the workforce

In your opinion, what HRD skills or competencies does an HRD manager need? How are these skills and competencies learned?

Describe the ways organizations attempt to integrate women and minorities into the organization and the relative success of these efforts