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:

Overhead Costs

Indirect costs of products or services.

Capacity-Sustaining Cost

Costs incurred to maintain the production capacity of a company at current levels, including costs for maintenance and repair of equipment.

Batch-Level Cost

Costs that are incurred as a result of producing a batch of products, rather than the production process as a whole.

Unit-Level Cost

A cost that is directly incurred for each unit of production or service provided.