In the APT Model, What Is the Nonsystematic Standard Deviation

question 26

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 18% and 250 securities?

• A) 1.14%
• B) 625%
• C) 0.5%
• D) 3.54%
• E) 3.16%

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Definitions:

Two-Statement Approach

A financial reporting method where income tax effects of items reported outside the income statement are recognized directly in equity instead of income statement.

Unrealized Gains

Profits that have been achieved on paper from investments but have not yet been realized through selling the investment.

Other Comprehensive Income (OCI)

Income that is not included in net income, including items that are not realized or not reflected in earnings.

Foreign Currency

Money or currency of a country other than one's own, used for international trade or investment.