Use the Equation for the Question(s) Below

question 67

Multiple Choice

Use the equation for the question(s) below.
Consider the following regression model:
R_s - r_f = a_s + (R_F1 - r_f) + (R_F2 - r_f) + e
-The term is a(n) :

• A) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the second factor portfolio.
• B) error term that has an expectation of zero and is uncorrelated with either factor.
• C) constant term.
• D) measure of the expected percent change in the excess return of a security for a 1% change in the excess return of the first factor portfolio.

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Definitions:

Current Account Balance

The sum of a country's net income from foreign trade, net current transfers, and net income, often indicating the country's economic health.

Current Account

The section in a nation’s international balance of payments that records its exports and imports of goods and services, its net investment income, and its net transfers.

Investment Income

Income earned from the investment of capital in assets such as stocks, bonds, real estate, or other investment vehicles.

Dollar/Yen Market

The foreign exchange market involving the trading of US dollars and Japanese yen.