In Developing the APT, Ross Assumed That Uncertainty in Asset

question 54

Multiple Choice

In developing the APT, Ross assumed that uncertainty in asset returns was a result of

• A) a common macroeconomic factor.
• B) firm-specific factors.
• C) pricing error.
• D) a common macroeconomic factor and firm-specific factors.

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Definitions:

Callable Bonds

Bonds that can be redeemed by the issued before their maturity date at a predefined calling price.

Fiscal Year

A 12-month period that a company or government uses for accounting purposes and preparing financial statements, not necessarily matching the calendar year.

Interest Payable

Interest payable is the amount of interest expense that has accumulated but not yet been paid by the company within a given accounting period.

Unamortized Premium

The portion of a bond's premium that has not yet been gradually written off or expensed over the bond's life to date.