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:

Expected-Rate-Of-Return

The forecasted percentage gain or loss that an investment is anticipated to generate over a specified period.

Average Total Cost

the cost per unit is calculated by dividing the entire production cost by the quantity of units produced.

Total Revenue

The total amount of money generated from the sale of goods or services by a company before any expenses are subtracted.

Interest-Rate Cost-Of-Funds

The rate of interest a financial institution pays to borrow funds or the cost of obtaining funds through borrowing or issuing debt.