In the Context of the Arbitrage Pricing Theory, as a Well-Diversified

question 57

Multiple Choice

In the context of the Arbitrage Pricing Theory, as a well-diversified portfolio becomes larger, its nonsystematic risk approaches

• A) one.
• B) infinity.
• C) zero.
• D) negative one.

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Definitions:

Dissolve

To formally end or terminate an entity, such as a corporation, partnership, or marriage, through legal means.

Outstanding Common Shares

The total number of common shares of a corporation that are issued and currently held by shareholders.

Total Equity

The total net value of a company, calculated as the difference between its total assets and total liabilities.

Excess Liquidity

The situation in which an individual or entity has more liquid assets available than is necessary for immediate operational needs.