THE CORRECT ASSUMPTION 2 OF APT IS, “THERE ARE MANY ASSETS, SO INVESTORS CAN FORM WELL-DIVERSIFIED PORTFOLIOS THAT ELIMINATE ASSET SPECIFIC RISK” AND NOT FACTOR RISK

23. - CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK
CFA 2018 LEVEL 2 PORTFORLIO QUESTION BANK R48 INTRODUCTION TO MULTIFACTOR MODELS Q BANK

23. B is correct. The correct Assumption 2 of APT is, “There are many assets, so investors can

form well-diversified portfolios that eliminate asset specific risk” and not factor risk. Section