Assuming the single-factor APT model applies, the factor beta for the market portfolio is: zero. one....
Assuming the single-factor APT model applies, the factor beta for the market portfolio is:
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zero. |
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one. |
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the average of the risk-free beta and the beta for the highest risk security in the portfolio. |
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impossible to calculate without collecting sample data. |
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irrelevant to the model. |
Homework Answers
Option, '2' is correct
Arbitrage pricing theory holds good, then factor beta for the market portfolio equals 1
Beta for the Market portfolio = 1
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Assuming the single-factor APT model applies, the factor beta
for the market portfolio is:
zero.
one....
Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return...
Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return of 19%. Portfolio B has a beta of 1.3 and an expected return of 8%. The risk-free rate of return is 3%. You can create a portfolio D which invests ____% in portfolio A and the rest in the risk-free asset so that it has the same beta as portfolio B, and compare the returns to portfolio D and portfolio B to decide the...
Consider the single factor APT. Portfolio A has a beta of 1.2 and an expected return...
Consider the single factor APT. Portfolio A has a beta of 1.2 and an expected return of 24%. Portfolio B has a beta of .8 and an expected return of 20%. The risk-free rate of return is 7%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _________. A;B A;A B;A B;B
Consider a 3-factor Arbitrage Pricing Theory (APT) model. Assuming a risk-free rate of 4%, calculate the...
Consider a 3-factor Arbitrage Pricing Theory (APT) model. Assuming a risk-free rate of 4%, calculate the expected return of this stock. Factor Risk Premium Sensitivity to each factor Change in GDP 5% 1 Change in interest rate 1% 0.5 Inflation ratio 2.5% 0.2 (4 marks) Consider the following portfolio composed of 3 stocks (A, B, C): Stock Quantity Price (£) Beta A 500 1.5 0.8 B 520 1.7 0.97 C 610 1.1 1.04 What is the beta of...
Consider the single factor APT. Portfolio A has a beta of 1.6 and an expected return...
Consider the single factor APT. Portfolio A has a beta of 1.6 and an expected return of 28%. Portfolio B has a beta of 0.8 and an expected return of 21%. The risk-free rate of return is 5%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio__ and a long position in portfolio__.
11. Consider the single factor APT. Portfolio A has a beta of 0.5 and an expected...
11. Consider the single factor APT. Portfolio A has a beta of 0.5 and an expected return of 12%. Portfolio B has a beta of 0.4 and an expected return of 13%. The risk-free rate of return is 5%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio A. A: A B.A; B C. B; A D. B; B
Variance of market portfolio return = 0.07 Given the assumption of a single factor model,...
Variance of market portfolio return = 0.07
Given the assumption of a single factor model, calculate the
following:
The residual variance of each of the above stocks;
The expected return on this 3-stock portfolio;
The beta factor of this 3-stock portfolio;
The variance of this 3-stock portfolio.
be? (10 marks) b) You are given the following table: Securities Weight Beta 1 Expected return 0.7 0.9 0.3 0.4 0.3 2 3 Variance of return 0.06 0.08 0.13 0.6 0.8 1.1...
9. The Arbitrage Pricing Theory Which of the following statements about the Arbitrage Pricing Theory (APT)...
9. The Arbitrage Pricing Theory Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. The APT is more restrictive than the Capital Asset Pricing Model (CAPM). The APT assumes that all investors hold the market portfolio The APT does not identify the relevant factors. The APT does not restrict the number or nature of the factors relevant to the determination of a stock's return. Karine, an analyst at Graffiti Aviation (GA), models...
1) A project has a market beta of 1.7. The risk-free rate is 3%, and the...
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Consider the following multifactor (APT) model of security returns for a particular stock. Factor Factor Beta...
Consider the following multifactor (APT) model of security returns for a particular stock. Factor Factor Beta Factor Risk Premium Inflation 1.7 5 % Industrial production 1.3 8 Oil prices 0.8 2 a. If T-bills currently offer a 8% yield, find the expected rate of return on this stock if the market views the stock as fairly priced. (Do not round intermediate calculations. Round your answer to 1 decimal place.) b. Suppose that the market expects the values for the three...
Please answer Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check...
Please answer
Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply The APT is more general than the Capital Asset Pricing Model (CAPM) The APT maintains that the realized return on any stock depends on changes unique to the firm. The APT model maintains that the realized returns on stocks depend on unexpected changes in fundamental economic factors The APT identifies all relevant factors that affect the realized returns on stocks Imani,...
11. Consider the single factor APT. Portfolio A has a beta of 0.5 and an expected return of 12%. Portfolio B has a beta of 0.4 and an expected return of 13%. The risk-free rate of return is 5%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio and a long position in portfolio A. A: A B.A; B C. B; A D. B; B
Variance of market portfolio return = 0.07
Given the assumption of a single factor model, calculate the
following:
The residual variance of each of the above stocks;
The expected return on this 3-stock portfolio;
The beta factor of this 3-stock portfolio;
The variance of this 3-stock portfolio.
be? (10 marks) b) You are given the following table: Securities Weight Beta 1 Expected return 0.7 0.9 0.3 0.4 0.3 2 3 Variance of return 0.06 0.08 0.13 0.6 0.8 1.1...
9. The Arbitrage Pricing Theory Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. The APT is more restrictive than the Capital Asset Pricing Model (CAPM). The APT assumes that all investors hold the market portfolio The APT does not identify the relevant factors. The APT does not restrict the number or nature of the factors relevant to the determination of a stock's return. Karine, an analyst at Graffiti Aviation (GA), models...
Please answer
Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply The APT is more general than the Capital Asset Pricing Model (CAPM) The APT maintains that the realized return on any stock depends on changes unique to the firm. The APT model maintains that the realized returns on stocks depend on unexpected changes in fundamental economic factors The APT identifies all relevant factors that affect the realized returns on stocks Imani,...
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