In the Single-Index Model Represented by the Equation R_i =

question 84

Multiple Choice

In the single-index model represented by the equation r_i = E(r_i) + β_iF + e_i, the term e_i represents

• A) the impact of unanticipated macroeconomic events on security i's return.
• B) the impact of unanticipated firm-specific events on security i's return.
• C) the impact of anticipated macroeconomic events on security i's return.
• D) the impact of anticipated firm-specific events on security i's return.
• E) the impact of changes in the market on security i's return.

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Definitions:

Financial Obligation

A legal responsibility to settle a debt or pay for a service or product that has been received.

Registered Securities

Securities with which the issuer or a transfer agent keeps a list of the names of owners. Dividends or interest payments are made to owners of record as of specified dates.

Transfer Agent

A financial institution or trust company designated by a corporation to keep records of investors, account balances, and transactions, and manage the transfer of stocks and bonds.

Negative Return

A loss that occurs when the value of an investment decreases compared to its initial purchase price.