Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?
A) The CAPM
B) The multifactor APT
C) Both the CAPM and the multifactor APT
D) Neither the CAPM nor the multifactor APT
E) None of these are true statements.

Question

Quizplus · Accepted Answer

The multifactor Arbitrage Pricing Theory (APT) does not specify the risk premium on factor portfolios; it only suggests that returns are a linear function of various factors.

Which Pricing Model Provides No Guidance Concerning the Determination of the Risk