Consider the Following List of Risk Factors

question 12

Multiple Choice

Consider the following list of risk factors:
(1) monthly growth in industrial production
(2) return on high book to market value portfolio minus return on low book to market value portfolio
(3) change in inflation
(4) excess return on stock market portfolio
(5) return on small cap portfolio minus return on big cap portfolio
(6) unanticipated change in bond credit spread
Which of the following factors would you use to develop a microeconomic-based risk factor model?

• A) (1), (2), and (3).
• B) (1), (3), and (5).
• C) (2), (4), and (5).
• D) (1), (3), and (6).
• E) (4), (5), and (6).

Understand the relationship between consumption and after-tax income.

Comprehend the concept of direct and inverse relationships between two variables.

Learn how changes in interest rates affect business investment in machinery and equipment.

Understand how to interpret and construct equations and graphs from given data sets.