【正文】 .By definition, the beta of the market portfolio is 1.A.reinvestment risk.With a diversified portfolio, the only risk remaining is market, beta, or systematic, risk. This is the only risk that influences return according to the CAPM.A.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: CAPMunsystematic risk.C.s rate of return is a function ofreinvestment risk.E.A.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: CAPMunique risk.B.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: CAPMunique risk.B.AACSB: AnalyticBlooms: RememberDifficulty: BasicTopic: CAPMunique risk.B.Multiple Choice Questions83.List and discuss two of the assumptions of the CAPM.81.Discuss the mutual fund theorem.79.Discuss the differences between the capital market line and the security market line.1.D.%.C.77.A security has an expected rate of return of and a beta of . The market expected rate of return is and the riskfree rate is . The alpha of the stock is%.B.%.A..E.A..E.A.buy stock X because it is underpriced.E.A.buy stock X because it is underpriced.E.A.fairly priced.D.overpriced.C.69.Your opinion is that security A has an expected rate of return of . It has a beta of . The riskfree rate is and the market expected rate of return is . According to the Capital Asset Pricing Model, this security iss volatility.C.A.above the capital market line.E.A.the efficient frontier with a riskfree asset.E.A.III and IVE.A.efficient portfolios and efficient individual securities only.E.A.They have the same economic view of the world.E.They plan for one identical holding period.B.I, III, and IVI and IIB.62.The amount that an investor allocates to the market portfolio is negatively related toI) the expected return on the market portfolio.II) the investor39。.B.the implications of the CAPM are no longer useful.the CAPM is no longer valid.B.all investors are fully informed, are rational, and are meanvariance optimizers.all investors are fully informed.B.all investors are rational, have the same holding period, and have heterogeneous expectations.all investors are rational.B.all investors are price takers, have the same holding period, and have homogeneous expectations.all investors are price takers.B.all investors are price takers, have the same holding period, and pay taxes on capital gains.all investors are price takers.B.None of the options is true.equal to the marginal price of risk for the market portfolio.B.the average degree of risk aversion of the investor population and the risk of the market portfolio as measured by its beta.the average degree of risk aversion of the investor population.B.either above or below the security market line depending on its standard deviation.on the security market line.B.either above or below the security market line depending on its standard deviation.on the security market line.B.illiquid stocks are good investments for frequent, shortterm traders.A.booktomarket ratios.E.A.can be portrayed graphically as the expected returnbeta relationship and provides a benchmark for evaluation of investment performance.E.A.All of the options are true.E.A.both systematic and unsystematic risk while standard deviation measures only systematic risk.E.A.A negative rate of return.D.directly with beta.D.specific risk.C.44.Capital asset pricing theory asserts that portfolio returns are best explained byB because it offers an expected excess return of %.C.If the expected market rate of return is and the riskfree rate is , which security would be considered the better buy and why?.E.A.buy CAT because it is underpriced.E.A.buy CAT because it is underpriced.E.A.buy CAT because it is underpriced.E.A.%.E.A.11%.E.A.11%.E.A.4%.E.A.11%.E.A.fairly priced.D.overpriced.C.32.Your opinion is that Boeing has an expected rate of return of . It has a beta of . The riskfree rate is and the market expected rate of return is . According to the Capital Asset Pricing Model, this security isunderpriced.B.None of the optionsunderpriced.B.Cannot be determined from data provided.A.fairly priced.D.%.C.27.A security has an expected rate of return of and a beta of . The market expected rate of return is and the riskfree rate is . The alpha of the stock is.C.26.You invest $600 in a security with a beta of and $400 in another security with a beta of . The beta of the resulting portfolio issell short the stock because it is overpriced.C.25.The riskfree rate is 7%. The expected market rate of return is 15%. If you expect a stock with a beta of to offer a rate of return of 12%, you shouldunderpriced.B.are always positive.are constant over time.B.nondiversifiable risk is negligible.A.In equilibrium, all securities lie on the security market line.E.A.negative alpha is considered to be a good buy.D.zero alphas.C.19.According to the Capital Asset Pricing Model (CAPM), overpriced securities havezero alphas.C.18.According to the Capital Asset Pricing Model (CAPM), underpriced securities havepositive betas.B.All of the optionsthe line that describes the expected returnbeta relationship for welldiversified portfolios only.B.E(RM) + Rf.