The General Purpose of Identifying Multiple Factors in the APT

question 10

Multiple Choice

The general purpose of identifying multiple factors in the APT model is to:

• A)identify the top three factors that have the largest impact on the market rate of return.
• B)identify and eliminate all systematic risks from a portfolio.
• C)identify the quantity of each factor that is needed to reduce a portfolio's risk,as measured by beta,to a level equal to that of the overall market.
• D)reduce the unsystematic risk to a level where the unsystematic risk of one security is unrelated to the unsystematic risk of any other security.
• E)reduce the slope of the security market line,thereby reducing portfolio risk.

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Definitions:

Carbonate Rocks

Sedimentary rocks composed primarily of carbonate minerals, such as limestone and dolomite, often formed from the accumulation of marine organisms' shells.

Wet Environments

Areas characterized by high moisture levels, which can significantly influence local ecosystems and geology.

Clastic Sedimentary Rocks

Clastic sedimentary rocks are formed from the accumulation and lithification of mechanical weathering debris, consisting mostly of fragments of older rocks.

Sociotechnical

Relating to the interaction between social and technical elements within an organization, focusing on the relationships between people and technology in work environments.