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:

Need For Cognition

A personality trait reflecting the enjoyment or engagement with thinking, problem-solving, and understanding complex ideas.

Self-Monitoring

The awareness and regulation of one's behavior in accordance with the social situations and cues.

Attitude Inoculation

A psychological technique that strengthens an individual's attitudes or beliefs by exposing them to small doses of counterarguments, thereby making them more resistant to future challenges or attacks.

Counterarguments

Arguments presented in opposition to another argument, offering a different perspective or rebuttal.