Question: Consider the multi-factor APT with two factors. Portfolio A is well-diversifed and has a beta of 0.75 on factor 1 and a beta of 0.5

Consider the multi-factor APT with two factors. Portfolio A is well-diversifed and has a beta of 0.75 on factor 1 and a beta of 0.5 on factor 2. The risk premiums on factos 1 and 2 are 2% and 3% respectively. The risk free rate of return is 6%. the expected return on portfolio A is _____ if no arbitrage opportunities exist.

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!

The City of Pfeiffer starts the year of 2024 with the general fund and an enterprise fund. The general fund has two activities: education and parks/recreation. For convenience, assume that the...

12. Consider a portfolio that invests 70% in the market portfolio and 30% in the risk-frce asset. What is the beta of this portfolio? A) B) C) D) E) 0.3 0.5 0.7 13. Consider the multi-factor APT with...

Please answer all four if you can, thank you 13. Consider the multi-factor APT with two factors. Portfolio A is well-diversified and has a beta of 0.75 on factor 1 and a beta of 0.5 on factor 2. The...

Two investment advisors are comparing performance. Advisor A average a 20% return with a portfolio beta of 1.5 and Advisor B averaged a 15% return with a portfolio beta of 1.2. If the T-bill rate was...

16. A point on the capital market line (CML) represents: a. A complete portfolio consisting of risk free asset and tangency portfolio b. A fairly priced security or portfolio c. Beta d. Sharpe ratio...

i cannot figure out how to get 16.25 estion 15 a yet swered Consider the multifactor APT with two factors. Portfolio A has a beta of .5 on factor 1 and a beta of 1.25 on factor 2. The risk premiums...

Based on the following selected financial information for NORG Limited, calculate the firms number of days in payables. Revenues: $178,000 Cost of Goods Sold: $145,000 Receivables: $ 25,000 Payables:...

6. Consider the multi-factor APT with two factors. Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2 . The risk premiums on the factors 1 and 2 portfolios are 1% and 7%...

1.5 points Save Answer Consider the multifactor APT with two factors. Portfolio A has a beta of 0.5 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and 2 portfolios are...

What is the risk premium on factor if no arbitrage opportunities exist? Departmental hotline: 3442-2688 ease scan and upload your steps for the last two questions to Canvas within 10 minutes after...

Consider the multifactor APT with two factors. Portfolio A has a beta of .5 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and 2 portfolios are 1% and 7%, respectively....

Why did the proportion of equities in long-term mutual funds increase from 38.3 percent in 1990 to 70.0 percent in 2007 and decrease back to 55.5 percent in 2008? How might an investors preference...

During the preparation of the bank reconciliation for Apache Grading Co., Sarah Ferrari, the assistant controller, discovered that Rocky Spring Bank incorrectly recorded a $610 check written by...

Suppose two policies are similar in all other provisions except that one has a $ 3 0 0 daily maximum benefit and the other has a $ 7 5 0 daily maximum benefit. The premium for the $ 3 0 0 provision...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...