The APT Requires a Benchmark Portfolio

question 48

Multiple Choice

The APT requires a benchmark portfolio

• A) that is equal to the true market portfolio.
• B) that contains all securities in proportion to their market values.
• C) that need not be well-diversified.
• D) that is well-diversified and lies on the SML.
• E) that is unobservable.

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Definitions:

Stock Dividend

A dividend payment made in the form of additional shares of the issuing company, rather than as cash.

Additional Paid-In Capital

The excess amount paid by investors over the par value of the stock during the issuance of shares.

Treasury Stock

Securities that were initially distributed to the public but later repurchased by the issuer, thus lowering the volume of shares in circulation.

Stockholders' Equity

The residual interest in the assets of a corporation after deducting its liabilities, representing the ownership interest held by stockholders.