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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Definitions:

Released

The action of making something available to the public, such as a product, movie, or software.

Variable Costing

An accounting method that includes only variable production costs (direct labor, direct materials, and variable manufacturing overhead) in product cost calculations.

Unit Product Cost

The cost calculated by summing all expenses (material, labor, and overhead) associated with producing a single unit of a product.

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain constant regardless of the volume of production, such as salaries of supervisors and rent for factory space.