- CFA Exams
- CFA Level I Exam
- Study Session 16. Portfolio Management (1)
- Reading 44. Using Multifactor Models
- Subject 1. Arbitrage pricing theory

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**CFA Practice Question**

Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 6%, the risk premium on the first factor portfolio is 4%, and the risk premium on the second factor portfolio is 3%. If portfolio A has a beta of 1.2 on the first factor and .8 on the second factor, what is its expected return?

B. 10.3%

C. 13.2%

A. 8.0%

B. 10.3%

C. 13.2%

Correct Answer: C

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**User Contributed Comments**
1

User |
Comment |
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rt2007 |
6 + 1.2*4 + 0.8*3 = 13.2 |