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nexus9112 [7]
2 years ago
5

Consider a single factor APT. Portfolio A has a beta of 2.0 and an expected return of 19%. Portfolio B has a beta of 1.0 and an

expected return of 8%. The risk-free rate of return is 3%. You can create a portfolio D which invests ____% in portfolio A and the rest in the risk-free asset so that it has the same beta as portfolio B, and compare the returns to portfolio D and portfolio B to decide the direction of arbitrage trading.
Business
1 answer:
Aleksandr-060686 [28]2 years ago
7 0

Answer:

Invest 50% in portfolio A and the rest 50% in risk-free asset to create Portfolio D, we will have the same systematic risk as that of Portfolio B.

The expected return of Portfolio D = 11%

Portfolio D and Portfolio B have the same beta of 1.0. But, portfolio D has a higher return of 11% as compared to the expected return of Portfolio B of 8%.

Buy Portfolio D, and sell Portfolio B.

Explanation:

A risk free asset is referred to an asset that provides a virtually guaranteed return and no possibility of loss.

Risk-free asset has a beta of 0.

Portfolio D Beta = Wa × Portfolio A Beta + Wb × Risk-free asset beta

1.0 = Wa * 2.0 + Wb * 0

Wa = 1.0/2.0

Wa = 0.50

If we invest 50% in portfolio A and the rest 50% in risk-free asset to create Portfolio D, we will have the same systematic risk as that of Portfolio B.

The expected return of Portfolio D = 0.50 × 0.19 + 0.50 ×0.03

The expected return of Portfolio D = 0.11

The expected return of Portfolio D = 11%

Portfolio D and Portfolio B have the same beta of 1.0. But, portfolio D has a higher return of 11% as compared to the expected return of Portfolio B of 8%.

Buy Portfolio D, and sell Portfolio B.

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~Brooke❤️
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Explanation:

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2 years ago
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Answer:

True

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Answer:

The correct option is;

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1) Understanding the purpose of the meeting

2) Find out about the meeting agenda

3) To prepare for meetings

4) Make adequate preparation for the meeting

5) Know other attendees

6) Acquire and send out relevant information

It is important to study the problems ahead of the meeting and listen carefully to avoid being the one to ask others what the meeting was for when you join the meeting

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6 0
2 years ago
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