In the APT Model, What Is the Nonsystematic Standard Deviation

question 40

Multiple Choice

In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of σ(e_i) equal to 20% and 40 securities?

• A) 12.5%
• B) 625%
• C) 0.5%
• D) 3.54%
• E) 3.16%

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Definitions:

Spontaneous Recovery

The unexpected return of a learned behavior after its apparent extinction, highlighting the persistence of memory traces.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, triggers a conditioned response.

Conditioned Response

A learned reaction to a conditioned stimulus that occurs because of previous conditioning.

Extinction

The diminishing of a conditioned response; occurs in classical conditioning when an unconditioned stimulus (US) does not follow a conditioned stimulus (CS).