- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 40. Using Multifactor Models
- Subject 1. Arbitrage Pricing Theory
CFA Practice Question
In the APT equation 2, the expected reward for bearing the risk of factor j is:
B. βj
C. αj
A. λj
B. βj
C. αj
Correct Answer: A
That is called the factor risk premium or factor price. It represents the expected reward for bearing the risk of a portfolio with a sensitivity of 1 to factor j and a sensitivity of 0 to all other factors.
User Contributed Comments 0
You need to log in first to add your comment.