The Arbitrage Pricing Theory Recognizes That the Return on the Market

question 20

Multiple Choice

The arbitrage pricing theory recognizes that the return on the market portfolio may not be the only potential source of ________ that affect the returns on equities.

• A) systematic risks
• B) market risks
• C) risks premium
• D) equity risk

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Definitions:

Income Elasticity

A measure of how much the demand for a product changes in response to a change in consumers' income.

Income Elasticity

A measure of how the quantity demanded of a good or service changes in response to a change in consumer income.

Inferior Good

A type of good for which demand decreases when consumers' income increases, opposite to normal goods.

Perfectly Inelastic

Describes a situation where the demand for a good does not change in response to a change in price.