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Suppose You Are Working with Two Factor Portfolios, Portfolio 1

Question 24

Multiple Choice

Suppose you are working with two factor portfolios, portfolio 1 and portfolio 2.The portfolios have expected returns of 15% and 6%, respectively.Based on this information, what would be the expected return on well-diversified portfolio A, if A has a beta of 0.80 on the first factor and 0.50 on the second factor? The risk-free rate is 3%.


A) 15.2%
B) 14.1%
C) 13.3%
D) 10.7%

Correct Answer:

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