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:

ABS

Anti-lock Braking System, a safety system that prevents the wheels from locking up and skidding during braking, maintaining steering control.

PCM

Powertrain Control Module, an automotive component that integrates the control of the engine's ignition, fuel injection, and transmission systems.

BCM

Body Control Module, an electronic control unit in a vehicle that manages various functions such as interior lighting, door locks, and windows.

Scanning Tool

A device used in automotive diagnostics to read and clear trouble codes, monitor real-time data, and perform system tests.