The Arbitrage Pricing Theory (APT)

question 44

Multiple Choice

The arbitrage pricing theory (APT)

• A) considers only one factor and is a narrower model than the CAPM.
• B) considers more factors than the CAPM and is a broader model.
• C) is useful only for well-diversified portfolios of common stock.
• D) is to practice because the factors are readily observable.

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Definitions:

Carbonate

The process of infusing water or another liquid with carbon dioxide gas to create carbonation, leading to what is commonly known as soda water, sparkling water, or fizzy drink.

Franchise Arrangements

Business models where a party (the franchisee) is allowed to use the trademark and business systems of another party (the franchisor) in return for a fee and adherence to specific operating principles.

Service-Sponsored Franchise Systems

A franchising approach where the franchisor provides a licensed privilege to the franchisee to do business and offers support services such as branding and training.

Wholesaler-Sponsored Voluntary Chains

Networks of independent retailers that voluntarily organize under a wholesaler to achieve economies of scale and marketing advantages.