<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: black; font-size: 10pt;"><span style="font-family: Times New Roman;">This is a teaching note on a proposed approach that will correct a common flaw in the way the return-generating process within the APT framework is illustrated in textbooks.<span style="mso-spacerun: yes;">&nbsp; </span>The problem can be resolved by dichotomizing the risk factors into two kinds.<span

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... acerun: yes;">&nbsp; </span>Based on this approach, the author eliminated the main source of confusion and developed an alternative way to teaching this important financial theory in a comprehensive and intuitive manner.</span></span></p>