Asked by
ICONIC_ SALEHYT AMEER
on Oct 20, 2024
Verified
Consider the one-factor APT. The standard deviation of return on a well-diversified portfolio is 20%. The standard deviation on the factor portfolio is 12%. The beta of the well-diversified portfolio is approximately ________.
A) .60
B) 1
C) 1.67
D) 3.20
One-Factor APT
The Arbitrage Pricing Theory that describes the expected return of a financial asset in relation to a single systematic risk factor.
Factor Portfolio
An investment portfolio constructed to have a high sensitivity to certain risk factors, aiming to achieve specific investment outcomes.
- Acquire knowledge of the principal components of portfolio theory, including diversification, beta, and the efficient frontier.
- Comprehend the principles of the Arbitrage Pricing Theory (APT) and identify how it diverges from the Capital Asset Pricing Model (CAPM).
Verified Answer
KO
Learning Objectives
- Acquire knowledge of the principal components of portfolio theory, including diversification, beta, and the efficient frontier.
- Comprehend the principles of the Arbitrage Pricing Theory (APT) and identify how it diverges from the Capital Asset Pricing Model (CAPM).