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Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. O The APT is a single-factor model. The
Which of the following statements about the Arbitrage Pricing Theory (APT) are correct? Check all that apply. O The APT is a single-factor model. The APT assumes that all investors hold the market portfolio. The APT allows the required return be a function of two, three, four, or more factors. The APT requires fewer assumptions than the Capital Asset Pricing Model (CAPM). O O Julie, an analyst at Kitsch Analytics (KA), models the company's stock assuming that all stocks' returns depend on only three risk factors: inflation, industrial production, and the aggregate degree of risk aversion. The risk-free rate is PRF = 8%, the return on the market is rm = 10%, and the rest of the available data is given in the following table: Variable Value 8% 12% 5% The required rate of return on an inflation portfolio, r1 The required return on an industrial production portfolio, r2 The required return on a risk-bearing portfolio, r3 Factor sensitivity to the inflation portfolio, bi Factor sensitivity to the industrial production portfolio, b2 Factor sensitivity to the risk-bearing portfolio, b3 Kitsch Analytics's beta, bka -0.5 0.4 1.1 2.0 Using the APT model, Julie calculates that KA's required rate of return is If Julie used the Capital Asset Pricing Model, she would have calculated that KA's required rate of return is
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