Use the Equation for the Question(s)below

question 17

Multiple Choice

Use the equation for the question(s) below.
Consider the following linear regression model:
(R_i - r_f) = a_i + b_i(R_Mkt - r_f) + e_i
-The b_i in the regression:

• A)measures the sensitivity of the security to market risk.
• B)measures the historical performance of the security relative to the expected return predicted by the SML.
• C)measures the deviation from the best fitting line and is zero on average.
• D)measures the diversifiable risk in returns.

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Definitions:

Exporting

The act of selling goods or services produced in one country to another country.

Importing

The act of bringing goods or services into one country from another for sale.

Account Surpluses

Situations where a country's exports exceed its imports over a given period, leading to a positive balance of trade.

International Gold Standard

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold, facilitating international trade and investment.