The APT Requires a Benchmark Portfolio

question 48

Multiple Choice

The APT requires a benchmark portfolio

• A) that is equal to the true market portfolio.
• B) that contains all securities in proportion to their market values.
• C) that need not be well-diversified.
• D) that is well-diversified and lies on the SML.
• E) that is unobservable.

---

Definitions:

Utility Loss

The decrease in satisfaction or usefulness that a consumer or business experiences, often due to factors such as product failure or obsolescence.

Cleaning the Apartment

The act of tidying, sanitizing, and organizing living spaces within an apartment.

Best Response

A strategy that yields the highest benefit for a player, given the strategies chosen by other players in a game theory context.

Simultaneous Game

A scenario in strategic interaction where all players make their decisions at the same time, often without knowledge of the others' choices.