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BaLLatris [955]
3 years ago
15

Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 19%. Portfolio B has a beta of .6 and an

expected return of 15%. The risk-free rate of return is 11%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _________. Multiple Choice A;A A;B B;B B;A
Business
1 answer:
Paladinen [302]3 years ago
8 0

Answer: A;B

Explanation:

<em>Consider the single factor APT. Portfolio A has a beta of 1.7 and an expected return of 19%. Portfolio B has a beta of .6 and an expected return of 15%. The risk-free rate of return is 11%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio </em><em><u>A</u></em><em> and a long position in portfolio </em><em><u>B.</u></em>

You should take a short position in the Portfolio with a lower risk premium and a long position on the Portfolio with a higher risk premium.

Using the single factor APT, the formula for risk premium can be derived from;

E(r) = Rf + beta (Risk premium on factor)

<u>Portfolio A</u>

19% = 11% + 1.7 * Risk premium

1.7 * risk premium = 8%

Risk Premium = 4.7%

<u>Portfolio B</u>

15% = 11% + 0.6 * RP

0.6 * RP = 4%

RP = 6.67%

Portfolio A Risk premium is lower so it should be <u>shorted.</u>

Portfolio B Risk premium is higher so it should taken a <u>long position</u> in.

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Answer:

<h2>C. Makes domestic consumer worse off. </h2>

Explanation:

A tariff is levied on the exports and imports between two countries. It is meant to regulate the foreign trade and encourage the domestic industries and safeguard them from the competition of foreign goods. Tariffs are source of income for states. Tariffs and import export quotas are most used instruments of protectionism. Tariffs are fixed or variable.

It can put the domestic consumer in an advantageous position as due to tariffs they would not be able to get less costly products.

8 0
3 years ago
On January 12, 2021, Jefferson Corporation purchased bonds of Rose Corporation for $77 million at par and classified the securit
olga2289 [7]

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a

Explanation:

4 0
3 years ago
When consumers start searching for ways to satisfy needs, their internal search is characterized by A. consulting close friends
Leto [7]

Using the Internet to find what other consumers feel about a specific product or service is the  internal search is characterized, When consumers start searching for ways to satisfy needs.

<h3>How internet is helpful in finding out about things?</h3>

Internet is very useful in many ways for the consumers, some of them are-

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Thus, option E is correct.

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7 0
2 years ago
The Constitution sets forth specific powers that can be exercised by the national government and provides that t national govern
Elza [17]

Answer:

B. The States

Explanation:

According to the Constitution of the United States, the national government as well as the state government have powers. There is a need however, to describe the difference between express and implied powers.

Express powers are specifically mentioned in the constitution while implied powers are powers the body of government will have as a result of its interference and connection to the express power.

Therefore, since the national government supersedes the state governments, any power that is connected to the express power constitutionally given to the federal government is referred to its implied power and as such the state is expected to also respect such.

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3 0
3 years ago
Jammer Company uses a weighted average perpetual inventory system that reports the following August 2 purchase 19 units at $16 p
Readme [11.4K]

Answer:

$23.19

Explanation:

The the weighted average perpetual inventory system recalculates a new unit cost whenever a new purchase is made. This unit cost is used to value cost of sales and inventory balance.

<em>Unit Cost  = Total Cost of units available for sale ÷ Total units available for sale</em>

August 18

Unit Cost  = [(19 units x $16) + (21 units x $15)] ÷ 40 units

                 = $15.475

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Unit Cost  = [(2 units x $15.475 ) + (24 units x $19)] ÷ 21 units

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therefore,

The per-unit value of ending inventory on August 31 is $23.19.

4 0
3 years ago
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