The Arbitrage Pricing Theory (APT)

question 45

Multiple Choice

The arbitrage pricing theory (APT) :

• A) considers only one factor and is a narrower model than the CAPM.
• B) considers more factors than the CAPM and is a broader model.
• C) is useful only for well-diversified portfolios of common stock.
• D) is easy to implement because the factors are readily observable.

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Definitions:

July

The seventh month of the year in the Gregorian calendar.

Direct Labor Cost

The wages paid to workers directly involved in producing a product or delivering a service.

Estimated

Approximately calculated or approximated based on available information.

February

The month that follows January and precedes March in the Gregorian calendar system.