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Based on the following information, what is the correct representation of the APT? Asset 1 Asset 2 Risk Free Expected Return 12% 22% 4% Sensitivity
Based on the following information, what is the correct representation of the APT?
| Asset 1 | Asset 2 | Risk Free |
Expected Return | 12% | 22% | 4% |
Sensitivity to Factor 1 | 0.1 | 0.15 |
|
Sensitivity to Factor 2 | -0.1 | 0.5 |
|
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A) E(R) = .04 + 1(0.922) + 2(0.123)
B) E(R) = .04 + 1(0.832) + 2(0.032)
C) E(R) = .04 + 1(0.893) + 2(0.092)
D) E(R) = .04 + 1(0.725) + 2(-0.075)
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