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Suppose that a single factor APT holds. The risk-free rate is 4% and the expected return on a portfolio with unit sensitivity (sensitivity equal to 1) to the factor is 7%. Consider a portfolio of two securities with the following characteristics: Security Sensitivity to the factor Proportion in the Portfolio A 0.8 0.3 B 1.7 0.7 According to APT, what is the portfolio's equilibrium expected return?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92712027

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