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Basic Question 0 of 13
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?
B. 10.3%
C. 13.2%
A. 8.0%
B. 10.3%
C. 13.2%
User Contributed Comments 1
| User | Comment |
|---|---|
| rt2007 | 6 + 1.2*4 + 0.8*3 = 13.2 |
I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
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.