Consider the Following Two Factor APT Model

question 23

Multiple Choice

Consider the following two factor APT model
E(R) = ?? + ??b? + ??b?

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

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Definitions:

Liability Account

An accounting record that holds the amounts owed by a company to creditors, suppliers, or lenders.

Terms

Conditions under which a sale is made, including payment timeframe, discounts, and penalties for late payment.

Discount

A reduction from the usual cost of something, or the act of lowering the price of goods, services, or securities.

Day

A 24-hour period from midnight to midnight.