Which of the Below Reasons Is NOT a Reason an APT

question 2

Multiple Choice

Which of the below reasons is NOT a reason an APT advocate would offer in support of the APT over either the CAPM or the multifactor CAPM?

• A) The APT makes less restrictive assumptions about investor preferences toward risk and return.
• B) The APT assumes that the investors trade off between risk and return depends solely on the basis of the expected returns and standard deviations of prospective investments.
• C) The APT does not rely on identifying the true market index, the theory is potentially testable.
• D) The APT makes no assumptions are made about the distribution of security returns.

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Definitions:

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the expected quantity, which can indicate efficiency or waste.

Standard Cost System

A cost accounting system that uses predetermined costs for estimating the actual cost of production.

Actual Results

The real values or outcomes achieved after the completion of a particular period, project, or activity, typically compared against previously set targets or budgets.

Variable Overhead Efficiency Variance

This is the difference between the actual hours taken to produce something and the standard hours expected, multiplied by the variable overhead rate per hour.