Both the APT and the CAPM Imply a Positive Relationship

question 5

Multiple Choice

Both the APT and the CAPM imply a positive relationship between expected return and risk.The APT views risk:

• A)very similarly to the CAPM via the beta of the security.
• B)in terms of individual intersecurity correlation versus the beta of the CAPM.
• C)via the industry wide or marketwide factors creating correlation between securities.
• D)as the standardized deviation of the covariance.
• E)None of the above.

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Definitions:

Myoglobinuria

The presence of myoglobin in the urine; can be caused by injured or damaged muscle tissue.

Phenylalanine

An essential amino acid that cannot be produced by the body and must be obtained from the diet, used in the biosynthesis of proteins.

Phenylketonuria

A genetic disorder characterized by the body's inability to break down the amino acid phenylalanine, requiring dietary restrictions from early life.

Genetic Disorder

A disease or condition caused by abnormalities in an individual's genome; can be inherited or result from a new mutation.