【正文】 Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and ReturnChapter 10Arbitrage Pricing Theory and Multifactor Models of Risk and Return Multiple Choice Questions1.___________ a relationship between expected return and risk.A.APT stipulatesB.CAPM stipulatesC.Both CAPM and APT stipulateD.Neither CAPM nor APT stipulateE.No pricing model has found2.Consider the multifactor APT with two factors. Stock A has an expected return of %, a beta of on factor 1 and a beta of .86 on factor 2. The risk premium on the factor 1 portfolio is %. The riskfree rate of return is 5%. What is the riskpremium on factor 2 if no arbitrage opportunities exit?A.%B.3%C.4%D.%E.%3.In a multifactor APT model, the coefficients on the macro factors are often called ______.A.systemic riskB.factor sensitivitiesC.idiosyncratic riskD.factor betasE.both factor sensitivities and factor betas4.In a multifactor APT model, the coefficients on the macro factors are often called ______.A.systemic riskB.firmspecific riskC.idiosyncratic riskD.factor betasE.unique risk5.In a multifactor APT model, the coefficients on the macro factors are often called ______.A.systemic riskB.firmspecific riskC.idiosyncratic riskD.factor loadingsE.unique risk6.Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?A.The CAPMB.The multifactor APTC.Both the CAPM and the multifactor APTD.Neither the CAPM nor the multifactor APTE.No pricing model currently exists that provides guidance concerning the determination of the risk premium on any portfolio7.An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.A.small positiveB.small negativeC.zeroD.large positiveE.large negative8.The APT was developed in 1976 by ____________.A.LintnerB.Modigliani and MillerC.RossD.SharpeE.Fama9.A _________ portfolio is a welldiversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.A.factorB.marketC.indexD.factor and marketE.factor, market, and index10.The exploitation of security mispricing in such a way that riskfree economic profits may be earned is called ___________.A.arbitrageB.capital asset pricingC.factoringD.fundamental analysisE.technical analysis11.In developing the APT, Ross assumed that uncertainty in asset returns was a result ofA.a mon macroeconomic factor.B.firmspecific factors.C.pricing error.D.neither mon macroeconomic factors nor firmspecific factors.E.both mon macroeconomic factors and firmspecific factors.12.The ____________ provides an unequivocal statement on the expected returnbeta relationship for all assets, whereas the _____________ implies that this relationship holds for all but perhaps a small number of securities.A.APT。 CAPMB.APT。 OPMC.CAPM。 APTD.CAPM。 OPME.APT and OPM。 CAPM13.Consider a single factor APT. Portfolio A has a beta of and an expected return of 16%. Portfolio B has a beta of and an expected return of 12%. The riskfree rate of return is 6%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio __________ and a long position in portfolio _______.A.A。 AB.A。 BC.B。 AD.B。 BE.A。 the riskless asset14.Consider the single factor APT. Portfolio A has a beta of and an expected return of 13%. Portfolio B has a beta of and an expected return of 15%. The riskfree rate of return is 10%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio _________ and a long position in portfolio _________.A.A。 AB.A。 BC.B。 AD.B。 BE.No arbitrage opportunity exists.15.Consider the onefactor APT. The variance of returns on the factor portfolio is 6%. The beta of a welldiversified portfolio on the factor is . The variance of returns on the welldiversified portfolio is approximately __________.A.%B.%C.%D.%E.%16.Consider the onefactor APT. The standard deviation of returns on a welldiversified portfolio is 18%. The standard deviation on the factor portfolio is 16%. The beta of the welldiversified portfolio is approximately __________.A.B.C.D.E.17.Consider the singlefactor APT. Stocks A and B have expected returns of 15% and 18%, respectively. The riskfree rate of return is 6%. Stock B has a beta of . If arbitrage opportunities are ruled out, stock A has a beta of __________.A.B.C.D.E.18.Consider the multifactor APT with two factors. Stock A has an expected return of %, a beta of on factor 1 and a beta of .8 on factor 2. The risk premium on the factor 1 portfolio is 3%. The riskfree rate of return is 6%. What is the riskpremium on factor 2 if no arbitrage opportunities exit?A.2%B.3%C.4%D.%E.%19.Consider the multifactor model APT with two factors. Portfolio A has a beta of on factor 1 and a beta of on factor 2. The risk premiums on the factor 1 and factor 2 portfolios are 1% and 7%, respectively. The riskfree rate of return is 7%. The expected return on portfolio A is __________ if no arbitrage opportunities exist.A.%B.%C.%D.%E.%20.Consider the multifactor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 6%, respectively. Stock A has a beta of on factor 1, and a beta of on factor 2. The expected return on stock A is 17%. If no arbitrage opportunities exist, the riskfree rate of return is ___________.A.%B.%C.%D.%E.%21.Consider a onefactor economy. Portfolio A has a beta of on th