Consider the Following Two Factor APT Model: E(R) = $\lambda$ 0

question 36

Multiple Choice

Consider the following two factor APT model: E(R) = $\lambda$ 0 + $\lambda$ 1b1 + $\lambda$ 2b2

• A) \(\lambda\)1 is the expected return on the asset with zero systematic risk.
• B) \(\lambda\)1 is the expected return on asset 1.
• C) \(\lambda\)1 is the pricing relationship between the risk premium and the asset.
• D) \(\lambda\)1 is the risk premium.
• E) \(\lambda\)1 is the factor loading.

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