In the APT model, what is the nonsystematic standard deviation of an equally-weighted portfolio that has an average value of $\sigma$(e_i) equal to 25% and 50 securities? A)12.5% B)625% C)0.5% D)3.54%

Question

Quizplus · Accepted Answer

Using the formula for the nonsystematic standard deviation of an equally-weighted portfolio in the APT model: σnonsys=(F1F1F1S1F1F1F10(e_i))^(1/2) Substituting the given values: σnonsys=(0.25*50*(e^(1*0.5)+(-1)^(1*0.5)))^(1/2) σnonsys=3.54% Therefore, the answer is D.

In the APT Model, What Is the Nonsystematic Standard Deviation σ\sigmaσ

In the APT Model, What Is the Nonsystematic Standard Deviation $\sigma$