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a) On the basis of a one-factor model, assume that the risk-free rate is 6% and the expected return on a portfolio with unit
a) On the basis of a one-factor model, assume that the risk-free rate is 6% and the expected return on a portfolio with unit sensitivity to the factor is 8.5%. Consider a portfolio of two securities with the following characteristics: Security Factor Sensitivity Proportion B 4.0 2.6 0.3 0.7 According to the APT, what is the portfolio's equilibrium expected return?
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Fundamentals of Investments
Authors: Gordon J. Alexander, William F. Sharpe, Jeffery V. Bailey
3rd edition
132926172, 978-0132926171
