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You Have a 3 Factor Model to Explain Returns

question 23

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You have a 3 factor model to explain returns.Explain what a factor represents in the context of the APT? Each factor is multiplied by a β what do these represent and how do they relate to the actual return?

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Definitions:

Compensation Package

The total offering of pay and benefits provided to employees, including salary, bonuses, health insurance, and retirement benefits.

Chief Executive Officer

The highest-ranking executive in a company, responsible for making major corporate decisions, managing overall operations, and acting as the main point of communication between the board of directors and corporate operations.

Board of Directors

A group of individuals elected to represent shareholders and govern the company's activities by establishing policies and making decisions.

Enterprise Incentive Plans

Strategic programs designed to encourage and reward employee performance across an organization, typically aligning with broader business goals.

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