Advantage(s)of the APT Is(are)

question 20

Multiple Choice

Advantage(s) of the APT is(are)

• A) that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios.
• B) that the model does not require a specific benchmark market portfolio.
• C) that risk need not be considered.
• D) a and b.
• E) b and c.

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Definitions:

Marginal Cost

The cost implicated in the production of one more unit of a good or service.

Perfectly Competitive

A market structure characterized by many small firms, a homogeneous product, no barriers to entry or exit, and where no single firm can influence the market price.

Profit-maximizing

The process of making business decisions that aim to increase the difference between total revenues and total costs to the highest possible level.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, such as labor or capital.