The APT Differs from the CAPM Because the APT

question 75

Multiple Choice

The APT differs from the CAPM because the APT

• A) places more emphasis on market risk.
• B) minimizes the importance of diversification.
• C) recognizes multiple unsystematic risk factors.
• D) recognizes multiple systematic risk factors.

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Definitions:

Broad

Descriptive of something with a wide scope, extent, or range; may refer to concepts or physical objects that cover a large area or numerous subjects.

Triplet

A term used in quantum mechanics and spectroscopy to describe a system or state with three closely related energy levels, or a spin state of a molecule in which two unpaired electrons have parallel spins.

Test-Statistic

A value calculated from sample data during a hypothesis test that is used to determine whether to reject the null hypothesis.

Two-Tail Test

A statistical test that determines the significance of a parameter by considering both ends (tails) of the distribution to test for extreme values.