Consider the one-factor APT. The standard deviation of returns on a well-diversified portfolio is 19%. The standard deviation on the factor portfolio is 12%. The beta of the well-diversified portfolio is approximately
A) 1.58.
B) 1.13.
C) 1.25.
D) 0.76.

Question

Quizplus · Accepted Answer

The beta of a well-diversified portfolio in the one-factor APT model is calculated as the ratio of the standard deviation of the portfolio to the standard deviation of the factor portfolio. Thus, beta = 19% / 12% = 1.58.

Consider the One-Factor APT