ASSUMING THAT PORTFOLIO A AND B'S RETURNS ARE REPRESENTED BY A SINGLE-FACTOR EQUATION OF E(RP) = RF + Λ1ΒP, THE VALUE OF Λ1 IS CLOSEST TO

3. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK

3. Assuming that portfolio A and B's returns are represented by a single-factor equation of

E(R

p

) = RF + λ

1

β

p

, the value of λ

1

is closest to:

A. 0.05.

B. 0.025.

C. 0.010.