【正文】 7.firmspecific riskC.AACSB: AnalyticBloom39。%B.Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return Answer Key%No arbitrage opportunity exists. AD.69.67.Multifactor models seek to improve the performance of the singleindex model byConsider 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 __________.Which of the following factors were used by Fama and French in their multifactor model?Which of the following factors did Chen, Roll and Ross not include in their multifactor model?t rely on the market portfolio that contains all assets.A.The SML has a downward slope.B.%B.%B.I and IVB.%B.that is equal to the true market portfolio.B.one.B.CAPM depends on riskreturn dominance。38.36.34.32.30. A and BD.27.25.D.$1,000D.%D.D.%D.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 _________.APT and OPM。a mon macroeconomic factor.B.factorB.small positiveB.systemic riskB.systemic riskB.APT stipulatesB.2.4.6.8.10.12.A。 BC.A.A.A.A.A.%D.%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:5%D.a riskfree arbitrageD.superior measurement of the riskfree rate of return over historical time periodsD.inflation rates.D.sell B short and buy A.D.40.42.44.46.48.50.52.54.proportional to its beta coefficient.I, II, and IVE.Excess return of longterm government bonds over TbillsE.All of these factors were included in their model.E.E.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.%D.%D.71.%C.C. 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.A. x = .systemic riskB.s: RememberDifficulty: BasicTopic: APTzeroD.Both the CAPM and the multifactor APTD.s: RememberDifficulty: BasicTopic: APTsystemic riskB.AACSB: AnalyticBloom39。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.75.A. BC.A。B.expanding beyond one factor to represent sources of systematic risk.B.they are sources of systematic riskC.C.Change in expected inflationC.nonfactor risk.C.%D.The benchmark portfolio for the SML may be any welldiversified portfolio.E.%E.%E.the deviation from its expected value of a factor that affects all security returns.E.negotiating for favorable brokerage fees.E.II and IV are correct.E.a portfolio that is equally weighted.E.equilibrium arbitrage.E.CAPM depends on riskreturn dominance。that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios.B.only factor risk mands a risk premium in market equilibrium.B.places more emphasis on market riskB.an investor has downside risk onlyB.3%B.A。%B.23.21.19.17.15.B。 OPMC.fundamental analysisE.SharpeE.Neither the CAPM nor the multifactor APTE.factor betasE.%E.Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and ReturnChapter 10Arbitrage Pricing Theory and Multifactor Models of Risk and Return 4%D.idiosyncratic riskD.Both the CAPM and the multifactor APTD.RossD.factoringD.APT。 AD.No arbitrage opportunity exists.%%%A.A.A.A.A.A.A.A.option arbitrage.D.a portfolio whose factor beta equals .D.II and III are correct.D.earning riskfree economic profits.D.a factor that affects all security returns.D.%D.%D.The SML for the APT has an intercept equal to the expected return on the market portfolio.D.%C.factor risk.B.Change in industrial wasteB.B.they may result from data snoopingB.A.A.A.A。Consider the onefactor APT. The variance of returns on the factor portfolio is 11%. The beta of a welldiversified portfolio on the factor is . The variance of returns on the welldiversified portfolio is approximately __________.Short Answer Questions80.No pricing model has foundBoth models attempt to explain asset pricing based on risk/return relationships.A.AACSB: AnalyticBloom39。The multifactor APTC.large positiveE.6.firmspecific riskC.AACSB: AnalyticBloom39。APT stipulatesB.D.%D.Consider the single factor APT. Portfolio A has a beta of and an expected return of 12%. Portfolio B has a beta of and an expected return of 13%. The riskfree rate of return is 5%. If you wanted to take advantage of an arbitrage opportunity, you should take a short position in portfolio _________ and a long position in portfolio _________.%E.%E.none of these statements are true.None of these factors were included in their model.Neither the change in industrial production, change in expected inflation, change in unanticipated inflation, nor excess return of longterm government bonds over Tbills were included in their model.I, II, III, and IV56.Which of the following is false about the security market line (SML) derived from the APT?In the APT model, wha