Consider the Following Two Factor APT Model E(R) = $\lambda$ ₀

question 49

Multiple Choice

Consider the following two factor APT model E(R) = $\lambda$ ₀ + $\lambda$ ₁b₁ + $\lambda$ ₂b₂

• A)\(\lambda\)₁ is the expected return on the asset with zero systematic risk.
• B)\(\lambda\)₁ is the expected return on asset 1.
• C)\(\lambda\)₁ is the pricing relationship between the risk premium and the asset.
• D)\(\lambda\)₁ is the risk premium.
• E)\(\lambda\)₁ is the factor loading.

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Definitions:

Additive Alleles

Alleles that contribute to the phenotype in a way that the effects of individual alleles add up to produce the overall phenotype.

Epistatic Alleles

Genetic alleles that mask the effect of alleles at other loci in determining phenotypic expression.

Highly Heritable

Describes traits or characteristics that are significantly influenced by genetics and can be passed from parents to offspring.

Beak Size

A specific trait of birds and some other animals, referring to the dimensions of the beak, which can vary widely among species and is often subject to natural selection.