【正文】 small negativeC.Neither the CAPM nor the multifactor APTE.AACSB: AnalyticBloom39。5.A.factor sensitivitiesC.%% = (%) + .86x + 5%。s: RememberDifficulty: BasicTopic: APT and CAPM___________ a relationship between expected return and risk.Security A has a beta of and an expected return of 12%. Security B has a beta of and an expected return of 11%. The riskfree rate is 6%. Explain the arbitrage opportunity that exists。Discuss the advantages of arbitrage pricing theory (APT) over the capital asset pricing model (CAPM) relative to diversified portfolios.B.%B.%B.B。 the riskless asset AB.%C.C.%C.using variables that are easier to forecast ex ante.C.allowing for multiple economic factors to have differential effects.D.they can be explained by security characteristic linesD.D.D.Excess return of high booktomarket stocks over low booktomarket stocks.D.Change in unanticipated inflationD.Change in unanticipated inflationD.standard deviation of returns.D.II and IIID.%E.proportional to its standard deviation.E.The SML has a downward slope, the SML for the APT shows expected return in relation to portfolio standard deviation, and the SML for the APT has an intercept equal to the expected return on the market portfolio are all false.The SML is not relevant for the APT.%%%%a random amount of return attributable to firm events.II, III, and IVhedging your portfolio through the use of options.%Only I is correct.that is unobservable.a portfolio that is equally weighted and contains securities from at least three different industry sectors.None of these is correct.covered interest arbitrage. APT depends on a no arbitrage condition and assumes many small changes are required to bring the market back to equilibrium. APT depends on a no arbitrage condition.B.sell A short and buy B.C.that the model does not require a specific benchmark market portfolio.C.interest rate fluctuations.C.only systematic risk is related to expected returns.C.identification of anticipated changes in production, inflation, and term structure as key factors in explaining the riskreturn relationshipC.minimizes the importance of diversificationC.the meanvariance efficiency frontierC.the law of prices is not violatedC.4%C.4%C. B and CB.%C.%C.%C.There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the uping year。Consider the single factor APT. Portfolios A and B have expected returns of 14% and 18%, respectively. The riskfree rate of return is 7%. Portfolio A has a beta of . If arbitrage opportunities are ruled out, portfolio B must have a beta of __________.Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%, respectively. The riskfree rate of return is 10%. Stock A has an expected return of 19% and a beta on factor 1 of . Stock A has a beta on factor 2 of ________.Consider the onefactor APT. Assume that two portfolios, A and B, are well diversified. The betas of portfolios A and B are and , respectively. The expected returns on portfolios A and B are 19% and 24%, respectively. Assuming no arbitrage opportunities exist, the riskfree rate of return must be ____________.Consider a onefactor economy. Portfolio A has a beta of on the factor and portfolio B has a beta of on the factor. The expected returns on portfolios A and B are 11% and 17%, respectively. Assume that the riskfree rate is 6% and that arbitrage opportunities exist. Suppose you invested $100,000 in the riskfree asset, $100,000 in portfolio B, and sold short $200,000 of portfolio A. Your expected profit from this strategy would be ______________.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 ___________.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.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?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 __________.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 __________.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。 BE.A.CAPM。both mon macroeconomic factors and firmspecific factors.technical analysisfactor, market, and indexFamalarge negativeNo pricing model currently exists that provides guidance concerning the determination of the risk premium on any portfoliounique riskunique riskboth factor sensitivities and factor betas%No pricing model has foundMultiple Choice Questions