Consider the single factor APT. Portfolios A and B have expected returns of 14% and 18%, respectively. The risk-free rate of return is 7%. Portfolio A has a beta of 0.7. If arbitrage opportunities are ruled out, portfolio B must have a beta of
A) 0.45.
B) 1.00.
C) 1.10.
D) 1.22.
E) None of the options are corrct.

Question

Quizplus · Accepted Answer

A: 14% = 7% + 0.7F; F = 10; B: 18% = 7% + 10b; b = 1.10.

Consider the Single Factor APT