Use the Equation for the Question(s)below

question 6

Multiple Choice

Use the equation for the question(s) below.
Consider the following factor model:
E[R_s] - r_f = (E[R_Mkt] - r_f) + E[R_SMB] + E[R_HML] + E[RPR1 YR]
-The term
Measures the sensitivity of the securities returns to:

• A)the overall market.
• B)book-to-market.
• C)size.
• D)momentum.

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Definitions:

Residual Value

The estimated value of an asset at the end of its useful life, often used in calculating depreciation or lease payments.

Depreciation

The purposeful spreading of the financial burden of a physical asset over its active life.

Accumulated Depreciation

The total amount of depreciation expensed over an asset's useful life, reducing its book value on the balance sheet.

Commercial Substance

A concept in accounting that indicates a transaction has caused a significant change in future cash flows.