Assuming that the single factor APT model applies, the beta for the market portfolio is:
A) zero.
B) one.
C) the average of the risk free beta and the beta for the highest risk security.
D) impossible to calculate without collecting sample data.

Question

Quizplus · Accepted Answer

The beta for the market portfolio in the context of the Capital Asset Pricing Model (CAPM), which is closely related to the Arbitrage Pricing Theory (APT), is always one. This is because the beta of a portfolio measures its sensitivity to the overall market movements, and the market portfolio, by definition, represents the entire market.

Assuming That the Single Factor APT Model Applies, the Beta