One Approach for Using Multifactor Models Is to Use Factors

question 58

Multiple Choice

One approach for using multifactor models is to use factors that capture systematic risk. Which of the following is NOT a common factor used in this approach?

• A) unexpected changes in inflation
• B) consumer confidence
• C) yield curve shifts
• D) unexpected changes in real GDP
• E) All of these are correct.

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Definitions:

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase price.

FASB's Proposal

A suggested change or addition to accounting standards published by the Financial Accounting Standards Board.

Employee Stock Options

A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares, usually at the discretion of the bondholder.