A factor,as used in APT,is a variable that:
A)represents a nondiversifiable risk.
B)affects the returns of risky assets in an unsystematic fashion.
C)correlates the returns of a risky asset with those of a risk-free asset.
D)measures the response of a specific asset to a systematic risk.
E)represents a firm-specific risk.

Question

Quizplus · Accepted Answer

In the Arbitrage Pricing Theory (APT), a factor is a variable that represents a nondiversifiable risk, which affects the returns of risky assets in a systematic way.

A Factor,as Used in APT,is a Variable That