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Chartered Financial Analyst Level 2

Chartered Financial Analyst Level 2

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An analyst gathers the following information about two well-diversified portfolios in an economy satisfying a one-factor arbitrage pricing theory model:

PortfolioExpected ReturnFactor Sensitivity
X8.0%0.8
Y16.0%2.4

The expected returns reflect a 1-year investment horizon and all investors agree on the expected returns of these portfolios. The return on the risk-free asset is closest to:

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