In the APT Model, What Is the Nonsystematic Standard Deviation $\sigma$

question 12

Multiple Choice

In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of $\sigma$ (e_i) equal to 20% and 20 securities?

• A)12.5%
• B)625%
• C)4.47%
• D)3.54%

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Definitions:

Compounded Quarterly

Interest added to the principal sum every quarter, or four times a year, resulting in the interest of the next period being calculated on the new total.

Car Loan

A sum of money borrowed to purchase a car, which is expected to be paid back with interest over a set period of time.

Down Payment

An initial upfront portion of the total amount due, typically associated with the purchase of expensive items like cars or real estate, to secure the deal.

Ordinary Annuity

A financial product involving regular payments received or paid over a designated period of time at equal intervals.