A Factor Is a Variable That

question 31

Multiple Choice

A factor is a variable that:

• A) affects the returns of risky assets in a systematic fashion.
• B) affects the returns of risky assets in an unsystematic fashion.
• C) correlates with risky asset returns in a unsystematic fashion.
• D) does not correlate with the returns of risky assets in an systematic fashion.

---

Definitions:

Impairment Loss

The decrease in an asset’s net carrying value that exceeds the future undisclosed cash flow it should generate.

Carrying Value

Also known as the book value, it represents the value of an asset or liability as reported on the company's balance sheet, calculated as the original cost minus depreciation, amortization, or impairment costs.

Recoverable Amount

The higher of an asset's fair value less costs to sell and its value in use, indicating the maximum amount that can be recovered from an asset.

Financial Statements

Documents that provide an overview of a company's financial condition, including income statement, balance sheet, and cash flow statement.