Which of the Following Must Be Done to Test the Multifactor

question 16

Multiple Choice

Which of the following must be done to test the multifactor CAPM or the APT?I) Specify the risk factorsII) Identify portfolios that hedge the risk factorsIII) Test the explanatory power of hedge portfoliosIV) 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:

Sales Budget

A financial plan that estimates future sales revenue within a specific period.

Production Cost

The total cost incurred by a company to manufacture a product, including labor, materials, and overhead expenses.

Budgeted Balance Sheet

A financial report that projects a company's financial position at a future date, estimating assets, liabilities, and owner's equity.

Master Budget

A comprehensive financial plan that includes all elements of an organization's operations, combining several individual budgets into one.