In a Multifactor APT Model, the Coefficients on the Macro

question 28

Multiple Choice

In a multifactor APT model, the coefficients on the macro factors are often called

• A) systematic risk.
• B) factor sensitivities.
• C) idiosyncratic risk.
• D) factor betas.
• E) factor sensitivities and factor betas.

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Definitions:

Binomial Probability Distribution

A probability distribution that summarizes the likelihood that a variable will take one of two independent values under a given set of parameters or assumptions.

Discrete Probability

Discrete probability involves probability distributions that deal with discrete random variables, which are variables that have specific, countable outcomes, such as rolling a die or flipping a coin.

Binomial Experiment

A statistical experiment that meets the criteria of having a fixed number of trials, each with two possible outcomes, independent trials, and a constant probability of success.

Independent Trials

Refers to experiments or processes in which the outcome of any given trial does not affect the outcomes of future or past trials.