Risk Factors in the APT Must Possess All of the Following

question 50

Multiple Choice

Risk factors in the APT must possess all of the following the characteristics except:

• A)Factors must be readily observable in risk/return space.
• B)Each factor must have a pervasive influence on stock returns
• C)The factors must influence expected return.
• D)Factors must be unpredictable.

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Definitions:

Marginal Cost

The extra expense resulting from the manufacture of an additional unit of a product or service.

Competitive Price-Taker

A market participant who cannot influence the price on the market but instead must accept the prevailing market price.

Marginal Revenue

The additional income earned from selling one more unit of a good or service.

Competitive Price-Taker

A market participant who accepts the prevailing market prices as given because they have no power to influence those prices due to intense competition.