The most realistic APT model would likely include:
A) multiple factors.
B) only one factor.
C) a factor to measure inflation.
D) Both multiple factors; and a factor to measure inflation.
E) Both only one factor; and a factor to measure inflation.

Question

Quizplus · Accepted Answer

APT is a multifactor model that considers multiple macroeconomic factors and their impact on an asset's return. Therefore, the most realistic APT model would include multiple factors. Additionally, it would also include a factor to measure inflation as it is a crucial macroeconomic factor that impacts the return on an asset. Hence, the answer is Both multiple factors; and a factor to measure inflation.

The Most Realistic APT Model Would Likely Include