Why should I choose AnalystNotes?

AnalystNotes specializes in helping candidates pass. Period.

Find out more

Basic Question 2 of 11

Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 6%, the risk premium on the first factor portfolio is 4%, and the risk premium on the second factor portfolio is 3%. If portfolio A has a beta of 1.2 on the first factor and .8 on the second factor, what is its expected return?

A. 8.0%
B. 10.3%
C. 13.2%
Check Answer Previous Q Next Q Print

User Contributed Comments 1

User Comment
rt2007 6 + 1.2*4 + 0.8*3 = 13.2
You need to log in first to add your comment.
I am happy to say that I passed! Your study notes certainly helped prepare me for what was the most difficult exam I had ever taken.
Andrea Schildbach

Andrea Schildbach

Learning Outcome Statements

describe arbitrage pricing theory (APT), including its underlying assumptions and its relation to multifactor models;

define arbitrage opportunity and determine whether an arbitrage opportunity exists;

calculate the expected return on an asset given an asset's factor sensitivities and the factor risk premiums;

CFA® 2025 Level II Curriculum, Volume 5, Module 40.