Questions from General Investment

Q: Refer to the following table, which shows risk and return measures

Refer to the following table, which shows risk and return measures for two portfolios. When plotting portfolio R relative to the capital market line, portfolio R lies: a. On the CML. b. Below the CML....

Q: Jeffrey Bruner, CFA, uses the capital asset pricing model (

Jeffrey Bruner, CFA, uses the capital asset pricing model (CAPM) to help identify mispriced securities. A consultant suggests Bruner use arbitrage pricing theory (APT) instead. In comparing CAPM and A...

Q: Assume that both X and Y are well-diversified portfolios and

Assume that both X and Y are well-diversified portfolios and the risk-free rate is 8%. / In this situation you would conclude that portfolios X and Y: a. Are in equilibrium. b. Offer an arbitrage opp...

Q: A zero-investment portfolio with a positive alpha could arise if

A zero-investment portfolio with a positive alpha could arise if: a. The expected return of the portfolio equals zero. b. The capital market line is tangent to the opportunity set. c. The Law of One P...

Q: According to the theory of arbitrage: a. High-

According to the theory of arbitrage: a. High-beta stocks are consistently overpriced. b. Low-beta stocks are consistently overpriced. c. Positive alpha investment opportunities will quickly disappear...

Q: The general arbitrage pricing theory (APT) differs from the single

The general arbitrage pricing theory (APT) differs from the single-factor capital asset pricing model (CAPM) because the APT: a. Places more emphasis on market risk. b. Minimizes the importance of div...

Q: An investor takes as large a position as possible when an equilibrium

An investor takes as large a position as possible when an equilibrium price relationship is violated. This is an example of: a. A dominance argument. b. The mean-variance efficient frontier. c. Arbitr...

Q: The feature of the general version of the arbitrage pricing theory (

The feature of the general version of the arbitrage pricing theory (APT) that offers the greatest potential advantage over the simple CAPM is the: a. Identification of anticipated changes in productio...

Q: In contrast to the capital asset pricing model, arbitrage pricing theory

In contrast to the capital asset pricing model, arbitrage pricing theory: a. Requires that markets be in equilibrium. b. Uses risk premiums based on micro variables. c. Specifies the number and identi...

Q: Bart Campbell, CFA, is a portfolio manager who has recently

Bart Campbell, CFA, is a portfolio manager who has recently met with a prospective client, Jane Black. After conducting a survey market line (SML) performance analysis using the Dow Jones Industrial A...