Question

(D) Interest-rate risk
28. Which of the following is the major difference between the capital asset pricing model (CAPM) and
arbitrage pricing theory (APT)?
(A) CAPM uses discounted cash flows whereas APT does not.
(B)
CAPM uses a single systematic risk factor to explain an asset's return whereas APT uses multiple
systematic factors.
APT uses a single systematic risk factor to explain an asset's return whereas CAPM uses multiple
systematic factors.
Under CAPM, the beta coefficient of the risk-free rate of return is assumed to be higher than that of any
(D) asset in the portfolio. Under APT, the beta coefficient of every asset in the portfolio is individually
compared to the beta of the risk-free rate.​

Answer 1

Answer:

the answer is:

(B) CAPM uses a single systematic risk factor to explain an asset's return whereas APT uses multiple systematic factors.

Explanation:

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