Use the Equation for the Question(s)below

question 40

Multiple Choice

Use the equation for the question(s) below.Consider the following regression model:
Rs - rf = as + (RF1 - rf) + (RF2 - rf) + ε_s
-The term ε_s is a(n) :

• A)measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the first factor portfolio.
• B)error term that has an expectation of zero and is uncorrelated with either factor.
• C)measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the second factor portfolio.
• D)constant term.

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