In the APT Model, What Is the Nonsystematic Standard Deviation

question 26

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 18% and 250 securities?

• A) 1.14%
• B) 625%
• C) 0.5%
• D) 3.54%
• E) 3.16%

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Definitions:

Limited Liability Company

An enterprise framework combining the corporation's limited liability safeguard with the tax efficiency found in partnerships or sole proprietorships.

Fiduciary Duty

A legal obligation of one party to act in the best interest of another when entrusted with care of their assets or interests.

Dissolution

The act of formally ending or disbanding an entity or agreement, such as dissolving a corporation or marriage.

Liquidation

The process of converting a company's assets into cash to pay off creditors before dissolving the business.