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Question $3$

Which statement best describes how the Arbitrage Pricing Theory $($APT$)$ differs from the Capital Asset Pricing Model $($CAPM$)?$

CAPM accounts for multiple risk factors, while APT focuses solely on market risk.

APT suggests that asset returns are influenced by multiple factors, unlike CAPM, which attributes returns to a single market factc

The risk$-$free rate is central to APT calculations but is disregarded in CAPM.

APT is a pricing model exclusively for bonds, whereas CAPM is used for stocks and securities