p of answer choices Both theories assume that undiversifiable risk is priced. Both theories assume that diversifiable risk is priced Both theories assume investors will hold a well-diversified portfolio Both the first and second responses are true. Both the first and third responses are

p of answer choices Both theories assume that undiversifiable risk is priced. Both theories assume that diversifiable risk is priced Both theories assume investors will hold a well-diversified portfolio Both the first and second responses are true. Both the first and third responses are

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 13MC

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Question

How is the arbitrage pricing theory (APT) similar to the capital asset pricing model?

Group of answer choices

Both theories assume that undiversifiable risk is priced.

Both theories assume that diversifiable risk is priced

Both theories assume investors will hold a well-diversified portfolio

Both the first and second responses are true.

Both the first and third responses are true.

Definition Definition Model that illustrates the correlation between the expected return and risk of capital investment in stock. According to this model, the expected rate of return on equity is equal to the risk-free return added to a risk premium, which is based on the stock beta.

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