For a One-Factor Model, an Analyst Finds the Variance of the Factor

question 12

Multiple Choice

For a one-factor model, an analyst finds the variance of the factor is 6 and the variance of the random error is 10. If the total variance for the security is 106, its sensitivity to the factor is

• A) 2.
• B) 5.
• C) 6.
• D) 4.

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Definitions:

Nonrandom Sample

A sample that is not selected using random methods, potentially leading to biased outcomes due to the lack of representativeness.

Nonrepresentative Sample

A sample that does not accurately reflect the characteristics of the broader population, potentially leading to biased results.

Homosexual Orientation

A sexual preference defined by feeling romantic or sexual desire towards individuals of the same gender.

Heterosexual Orientation

A sexual orientation characterized by an emotional, romantic, or sexual attraction to people of the opposite sex.