Question: The APT straight line is given by E (R) = E(R) + [E (1) E (R)]Bi. Suppose there are three portfolios on this straight line.

The APT straight line is given by E (R) = E(R)

The APT straight line is given by E (R) = E(R) + [E (1) E (R)]Bi. Suppose there are three portfolios on this straight line. Given the following information provided, answer the questions below: Mean Beta Specific Risk A 15% 0.7 0 B 21% 1.3 0 ? 1.8 0 i. What is the slope of the APT line? (10 marks) ii. Calculate the E (R) (10 marks) iii. What is the expected rate of return on portfolio C? (5 marks) [TOTAL: 50 MARKS]

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