A Factor,as Used in APT,is a Variable That

question 46

Multiple Choice

A factor,as used in APT,is a variable that:

• A)represents a nondiversifiable risk.
• B)affects the returns of risky assets in an unsystematic fashion.
• C)correlates the returns of a risky asset with those of a risk-free asset.
• D)measures the response of a specific asset to a systematic risk.
• E)represents a firm-specific risk.

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Definitions:

Managerial Options

Options given to executives and managers as part of their compensation package, allowing them to purchase company stock in the future at a price set today.

Tactical Opportunities

Investment strategies that aim to exploit short-term market inefficiencies to generate returns.

Capital Budgeting

The process businesses use to evaluate and select long-term investments that are expected to yield returns over a period of time.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product or service.