Based on a Multi-Factor APT Model, the Concept of Portfolio

question 11

Multiple Choice

Based on a multi-factor APT model, the concept of portfolio diversification is to minimize which one of the following?

• A) weighted average of betas
• B) weighted average of betas * F
• C) F
• D) weighted average of unsystematic risks
• E) weighted average of expected returns

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Definitions:

Fixed Asset Account

An account on the balance sheet that reports the cost and accumulated depreciation of long-term tangible assets used in the operations of a business.

Accumulated Depreciation

The cumulative depreciation of an asset up to a single point in its life, reflecting its decrease in value over time.

Debit

A bookkeeping entry that boosts an asset or expense account, or reduces a liability or equity account.

Tangible Asset

Physical assets or property owned by a person or company, such as buildings, machinery, and vehicles.