In Terms of the Risk/return Relationship in the APT

question 20

Multiple Choice

In terms of the risk/return relationship in the APT,

• A)only factor risk commands a risk premium in market equilibrium.
• B)only systematic risk is related to expected returns.
• C)only nonsystematic risk is related to expected returns.
• D)only factor risk commands a risk premium in market equilibrium, and only systematic risk is related to expected returns.

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Definitions:

Type I Error

The incorrect rejection of a true null hypothesis, also known as a "false positive" in statistical hypothesis testing.

Null Hypothesis

A hypothesis used in statistical testing that assumes no significant difference or effect exists between certain datasets or conditions.

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Professionals who apply engineering principles to the design, development, maintenance, testing, and evaluation of the software and systems that make computers or anything containing software, like chips, work.