CFA Practice Question

There are 119 practice questions for this study session.

CFA Practice Question

In the APT equation 2, the expected reward for bearing the risk of factor j is:

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.

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