Which of the Following Must Be Done to Test the Multifactor

question 40

Multiple Choice

Which of the following must be done to test the multifactor CAPM or the APT?
I.specify the risk factors
II.identify portfolios that hedge the risk factors
III.test the explanatory power of hedge portfolios
IV.test the risk premiums of hedge portfolios

• A) I and II
• B) II,and IV
• C) II,and III
• D) I,II,and IV
• E) I,II,III,and IV

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Definitions:

Operating Income

Earnings before interest and taxes (EBIT), representing the income generated from normal business operations.

Fixed Costs

Costs that do not fluctuate with the level of production or sales, such as rent, salaries, and insurance premiums.

Break-Even Sales

The amount of revenue required to cover a company's total fixed and variable costs, without making a profit or loss.

Sales Revenue

The total amount of money generated from sales of goods or services, excluding any returns or allowances.