Use the Equation for the Question(s)below

question 49

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 a_s is a(n) :

• A)error term that has an expectation of zero and is uncorrelated with either factor.
• B)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.
• C)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.
• D)constant term.

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Definitions:

Negotiable Note

A financial instrument containing a promise to pay a certain amount of money, either on demand or at a future date, which is transferable by endorsement.

Holder In Due Course

A legal term describing a person who has acquired a negotiable instrument in good faith and for value, thereby granting certain rights in excess of the original payee.

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The act of informing someone about something, typically in a formal or official manner.

Stolen Check

A check that has been unlawfully taken from its rightful owner leading to potential unauthorized use or fraud.