Consider the one-factor APT.The variance of returns on the factor portfolio is 11%.The beta of a well-diversified portfolio on the factor is 1.45.The variance of returns on the well-diversified portfolio is approximately __________.
A)23.1%
B)6.0%
C)7.3%
D)14.1%
E)none of the above

Question

Quizplus · Accepted Answer

The variance of the well-diversified portfolio is calculated as the square of the beta times the variance of the factor portfolio: (1.45^2) * 11% = 23.1%.

Consider the One-Factor APT