The Most Significant Conceptual Difference Between the Arbitrage Pricing Theory

question 31

Multiple Choice

The most significant conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the CAPM ________.

• A) places less emphasis on market risk
• B) recognizes multiple unsystematic risk factors
• C) recognizes only one systematic risk factor
• D) recognizes multiple systematic risk factors

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Definitions:

Compensatory Damages

Financial compensation awarded to a plaintiff to offset losses or injuries incurred due to the defendant's actions or negligence.

Nonbreaching Party

The party in a contract who has not violated the agreement terms.

Express Warranty

A clear, affirmative promise or assurance by a seller about the quality or nature of a product or service.

Oral Promise

A commitment made verbally by one party to another without written documentation.