AGGARWAL IS INCORRECT ABOUT PORTFOLIO Y

19. C is correct. Aggarwal is incorrect about Portfolio Y. “Factor portfolios by definition will

have a factor sensitivity of 1 to a particular factor and zero sensitivity for all other factors.

For Portfolio Y to be a factor portfolio for the inflation risk factor it must have factor beta of

1 to inflation risk and zero for the other factors.” Section 3. LO.a.