Section B (2 Mark)

Section B (2 Mark)

Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximately __________.
A . 3.60%
B . 6.00%
C . 7.30%
D . 10.10%

Answer: C