Use the Equation for the Question(s)below

question 46

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 is a(n) :

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

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Definitions:

Rods

Photoreceptor cells in the retina of the eye that are responsible for vision at low light levels but do not mediate color vision.

Cones

Photoreceptor cells in the retina of the eye responsible for color vision and functioning best in relatively bright light.

Adapt

The process of adjusting or changing to become suitable for a new environment or conditions.

Intense Stimuli

External or internal factors that have a strong impact on the sensory or psychological experience of an individual, often leading to a significant reaction or response.