Assuming no arbitrage opportunities exist, the risk premium on the factor portfolios F1 and F2 should be: O a. 12.14%, 9.29% O b. 9.29%, 12.14% O c. 5%,4% O d. 4%,5%
Assuming no arbitrage opportunities exist, the risk premium on the factor portfolios F1 and F2 should be: O a. 12.14%, 9.29% O b. 9.29%, 12.14% O c. 5%,4% O d. 4%,5%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Transcribed Image Text:Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of
return is 3%. The following information is available about two well-diversified portfolios:
Portfolio
B on F1
B on F2
Expected Return
0.5
1.5
11.5%
2.0
-1.0
9.0%
Assuming no arbitrage opportunities exist, the risk premium on the factor portfolios F1 and F2 should be:
A
B
O a. 12.14%, 9.29%
O b. 9.29%, 12.14%
O c. 5%,4%
O d. 4%,5%
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