【正文】 ll stocks over large stocks.C.C.C.they are sources of systematic riskC.incorporating firmspecific ponents into the pricing model.C.expanding beyond one factor to represent sources of systematic risk.B.%B.B.%B.A。A。 BC.A.A.A.75.79.Name three variables that Chen, Roll, and Ross used to measure the impact of macroeconomic factors on security returns. Briefly explain the reasoning behind their model.1.AACSB: AnalyticBloom39。%E.systemic riskB.In a multifactor APT model, the coefficients on the macro factors are often called ______.s: RememberDifficulty: BasicTopic: APTunique riskThe coefficients are called factor betas, factor sensitivities, or factor loadings.Both the CAPM and the multifactor APTD.small positiveB.zeroD.No pricing model currently exists that provides guidance concerning the determination of the risk premium on any portfolio.The multifactor APT provides no guidance as to the determination of the risk premium on the various factors. The CAPM assumes that the excess market return over the riskfree rate is the market premium in the single factor CAPM.s: RememberDifficulty: BasicTopic: APTIn a multifactor APT model, the coefficients on the macro factors are often called ______.systemic riskB.idiosyncratic riskD. x = .2.A. explain how an investor can take advantage of it. Give specific details about how to form the portfolio, what to buy and what to sell.78.C.%C.%C. AD.71.A。%D.D.%D.calculating beta coefficients by an alternative method.D.modeling the systematic ponent of firm returns in greater detail, incorporating firmspecific ponents into the pricing model, and allowing for multiple economic factors to have differential effects.E.they are more appropriate for a singlefactor modelE.E.E.All of these factors were included in their model.E.Change in expected inflation and Change in unanticipated inflationE.Excess return of longterm government bonds over TbillsE.both factor risk and nonfactor risk.E.I, II, and IVE.%proportional to its beta coefficient.55.54.53.52.51.50.49.48.47.46.45.44.43.42.41.40.CAPM assumes many small changes are required to bring the market back to equilibrium。sell B short and buy A.D.that risk need not be considered.D.inflation rates.D.only nonsystematic risk is related to expected returns.D.superior measurement of the riskfree rate of return over historical time periodsD.recognizes multiple unsystematic risk factorsD.a riskfree arbitrageD.the opportunity set is not tangent to the capital allocation lineD.5%D.5%D.Consider the multifactor APT. There are two independent economic factors, F1and F2. The riskfree rate of return is 6%. The following information is available about two welldiversified portfolios:B。%D.%D.%D. economic growth may be strong, moderate, or weak. The returns for the uping year on stocks A, B, and C for each of these states of nature are given below:A.A.A.A.A.A.A.A.A.A. BC.A。A。 APTD.12.11.10.9.8.7.6.5.4.3.2.1.APT stipulatesB.%B.systemic riskB.systemic riskB.systemic riskB.The CAPMB.small positiveB.LintnerB.factorB.arbitrageB.a mon macroeconomic factor.B.APT。APT and OPM。 BC.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 _________.B。%D.D.D.4%D.%D.%D.$1,000D.%D.D.D.25.26.27.28. A and BD.29.30.31.32.33.34.35.36.37.38.39.CAPM depends on riskreturn dominance。pure arbitrage.B.one.B.one that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero.B.that is equal to the true market portfolio.B.I and III are correct.B.%B.buying low and selling high.B.I and IVB.firmspecific risk.B.%B.%B.%B.%B.The SML has a downward slope.B.The SML has a downward slope.B.A.A.t rely on the market portfolio that contains all assets.In a factor model, the return on a stock in a particular period will be related toWhich of the following factors did Chen, Roll and Ross not include in their multifactor model?Which of the following factors did Chen, Roll and Ross include in their multifactor model?Which of the following factors were used by Fama and French in their multifactor model?Consider the singlefactor APT. Stocks A and B have expected returns of 12% and 14%, respectively. The riskfree rate of return is 5%. 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 19%. The standard deviation on the factor portfolio is 12%. The beta of the welldiversified portfolio is approximately __________.Black argues that past risk premiums on firmcharacteristic variables, such as those described by Fama and French, are problematic because ________.Multifactor models seek to improve the performance of the singleindex model byMultifactor models such as the one constructed by Chen, Roll, and Ross, can better describe assets39。67.68.69.70. AD.A。No arbitrage opportunity exists.%%67Discuss arbitrage opportunities in the context of violations of the law of one price.Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return Answer KeyBoth CAPM and APT stipulateD.%B.3.AACSB: AnalyticBloom39。factor betasE.firmspecific riskC.A.7.16