In Terms of the Risk/return Relationship in the APT

question 66

Multiple Choice

In terms of the risk/return relationship in the APT,

• A) only factor risk commands a risk premium in market equilibrium.
• B) only systematic risk is related to expected returns.
• C) only nonsystematic risk is related to expected returns.
• D) only factor risk commands a risk premium in market equilibrium, and only systematic risk is . related to expected returns.
• E) only factor risk commands a risk premium in market equilibrium, and only nonsystematic risk is related to expected returns.

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Definitions:

Division

A process in mathematics of distributing a group of things into equal parts or a method in logic of breaking down categories into smaller subcategories.

Hasty Generalization

A fallacy where a conclusion is not logically justified by sufficient or unbiased evidence.

Fallacy of Logical Structure

A type of logical error where an argument's structure is flawed, leading to invalid conclusions.

Immortal

Describes an entity or being that is not subject to death, possessing eternal life or existence.