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Murljashka [212]
3 years ago
11

Consider a single factor APT. Portfolio A has a beta of 1.0 and an expected return of 16%. Portfolio B has a beta of 0.8 and an

expected return of 12%. The risk-free rate of return is 6%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _______.
Business
1 answer:
nirvana33 [79]3 years ago
4 0

Answer:

B, A

Explanation:

A: 16% = 1.0F + 6%; F = 10%; B: 12% = 0.8F + 6%: F = 7.5%; thus, short B and take a long position in A.

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All else the same, if a bank's liabilities are more sensitive to interest rate fluctuations than are its assets, then ________ i
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A) an increase; reduce

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6 0
3 years ago
Design Interiors has a cost of equity of 14.9 percent and a pretax cost of debt of 8.6 percent. The firm's target weighted avera
Savatey [412]

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0.73

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Tax rate = 34%

Cost of equity = 14.9 %

Cost of debt = 8.6%

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WACC = (cost of equity × % of equity) + (cost of debt × % of debt) + ( 1 - tax rate)

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Let

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= 0.73

4 0
3 years ago
Read 2 more answers
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