【正文】 .%D.%E.%70.Consider a single factor APT. Portfolio A has a beta of and an expected return of 22%. Portfolio B has a beta of and an expected return of 17%. The riskfree rate of return is 4%. 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 asset71.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 _________.A.A。 AB.A。 BC.B。 AD.B。 BE.No arbitrage opportunity exists.72.Consider the onefactor APT. The variance of returns on the factor portfolio is 9%. 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.%73.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 __________.A.%B.%C.%D.%E.%74.Consider the onefactor APT. The standard deviation of returns on a welldiversified portfolio is 22%. The standard deviation on the factor portfolio is 14%. The beta of the welldiversified portfolio is approximately __________.A.B.C.D.E.67Short Answer Questions75.Discuss the advantages of arbitrage pricing theory (APT) over the capital asset pricing model (CAPM) relative to diversified portfolios.76.Discuss the advantages of the multifactor APT over the single factor APT and the CAPM. What is one shorting of the multifactor APT and how does this shorting pare to CAPM implications?77.Discuss arbitrage opportunities in the context of violations of the law of one price.78.Discuss the similarities and the differences between the CAPM and the APT with regard to the following factors: capital market equilibrium, assumptions about risk aversion, riskreturn dominance, and the number of investors required to restore equilibrium.79.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。 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.80.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.Chapter 10 Arbitrage Pricing Theory and Multifactor Models of Risk and Return Answer Key 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 foundBoth models attempt to explain asset pricing based on risk/return relationships.AACSB: AnalyticBloom39。s: RememberDifficulty: BasicTopic: APT and CAPM2.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.%% = (%) + .86x + 5%。 x = .AACSB: AnalyticBloom39。s: ApplyDifficulty: ChallengeTopic: APT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 betasThe coefficients are called factor betas, factor sensitivities, or factor loadings.AACSB: AnalyticBloom39。s: RememberDifficulty: BasicTopic: APT4.In a multifactor APT model, the coefficients on the macro factors are often called ______.A.systemic riskB.firmspecific riskC.idiosyncratic riskD.factor betasE.unique riskThe coefficients are called factor betas, factor sensitivities, or factor loadings.AACSB: AnalyticBloom39。s: RememberDifficulty: BasicTopic: APT5.In a multifactor APT model, the coefficients on the macro factors are often called ______.A.systemic riskB.firmspecific riskC.idiosyncratic riskD.factor loadingsE.unique riskThe coefficients are called factor betas, factor sensitivities, or factor loadings.AACSB: AnalyticBloom39。s: RememberDifficulty: BasicTopic: APT6.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 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.AACSB: AnalyticBloom39。s: RememberDifficulty: IntermediateTopic: APT and CAPM7.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 negativeIf the investor can construc