Assuming That the Single Factor APT Model Applies,the Beta for the Market

question 40

Multiple Choice

Assuming that the single factor APT model applies,the beta for the market portfolio is:

• A) zero.
• B) one.
• C) the average of the risk free beta and the beta for the highest risk security.
• D) impossible to calculate without collecting sample data.
• E) None of these.

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Definitions:

Federal Funds Market

The Federal Funds Market is a financial market that allows banks to borrow or lend excess reserves to each other on an overnight basis, with interest rates known as the federal funds rate.

Required Reserves

The minimum amount of funds that a bank must hold in reserve against deposit liabilities, as mandated by central banking authorities.

Open Market Sale

The selling of government bonds to the public or banks by the central bank to control the money supply.

Discount Rate

The interest rate charged by central banks on loans offered to commercial banks or the rate used to discount future cash flows to present value.