In the APT Model, What Is the Nonsystematic Standard Deviation

question 59

Multiple Choice

In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(e_i) equal to 25% and 50 securities?

• A) 12.5%
• B) 625%
• C) 0.5%
• D) 3.54%
• E) 14.59%

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Definitions:

Predominantly

Predominantly means mainly or for the most part, indicating that something is the dominant, principal, or most common element in a mixture or series.

Logical

Pertaining to the formal principles of reasoning and correct thinking.

Precise

Being exact, accurate, and clearly expressed or delineated.

Objective

A specific, measurable, achievable, relevant, and time-bound goal that an individual or organization aims to accomplish.