Arbitrage pricing theory and multifactor models of risk and return –

 

 


Multiple Choice Questions
 

1. ___________ a intercommunity among expected requite and betray. 
A. APT stipulates
B. CAPM stipulates
C. Both CAPM and APT stipulate
D. Neither CAPM nor APT stipulate
E. No pricing design has found

 

2. ___________ a intercommunity among expected requite and betray. 
A. APT stipulates
B. CAPM stipulates
C. CCAPM stipulates
D. APT, CAPM, and CCAPM stipulate
E. No pricing design has found

 

3. In a multi-element APT design, the coefficients on the macro elements are frequently named ______. 
A. systemic betray
B. element sensitivities
C. idiosyncratic betray
D. element betas
E. B and D

6. Which pricing design provides no control relating the choice of the betray enhancement on element portfolios? 
A. The CAPM
B. The multielement APT
C. Both the CAPM and the multielement APT
D. Neither the CAPM nor the multielement APT
E. None of the aggravate is a gentleman announcement.
 

7. An arbitrage turn insists if an endueor can fabricate a __________ enduement portfolio that conquer surrender a enduring melioratement. 
A. positive
B. negative
C. zero
D. all of the aggravate
E. none of the aggravate

 9. A _________ portfolio is a well-mannered-parti-colored portfolio fabricateed to accept a beta of 1 on one of the elements and a beta of 0 on any other element. 
A. factor
B. market
C. index
D. A and B
E. A, B, and C

10. The exploitation of deposit mispricing in such a way that betray-playing economic melioratements may be earned is named ___________. 
A. arbitrage
B. chief asset pricing
C. factoring
D. fundamental analysis
E. none of the aggravate 

11. In developing the APT, Ross inconsequent that casualty in asset requites was a upshot of 
A. a beggarly macroeconomic element
B. firm-point elements
C. pricing error
D. neither A nor B
E. both A and B

12. The ____________ provides an substantial announcement on the expected requite-beta intercommunity for all issue, forasmuch-as the _____________ implies that this intercommunity holds for all but peradventure a feeble compute of securities. 
A. APT, CAPM
B. APT, OPM
C. CAPM, APT
D. CAPM, OPM
E. none of the aggravate

14. Consider the solitary element APT. Portfolio A has a beta of 0.2 and an expected requite of 13%. Portfolio B has a beta of 0.4 and an expected requite of 15%. The betray-playing trounce of requite is 10%. If you wanted to siege custom of an arbitrage turn, you should siege a limited comcompose in portfolio _________ and a hanker comcompose in portfolio _________. 
A. A, A
B. A, B
C. B, A
D. B, B
E. none of the aggravate 

15. Consider the one-element APT. The antagonism of requites on the element portfolio is 6%. The beta of a well-mannered-parti-colored portfolio on the element is 1.1. The antagonism of requites on the well-mannered-parti-colored portfolio is closely __________. 
A. 3.6%
B. 6.0%
C. 7.3%
D. 10.1%
E. none of the aggravate

16. Consider the one-element APT. The banner flexuosity of requites on a well-mannered-parti-colored portfolio is 18%. The banner flexuosity on the element portfolio is 16%. The beta of the well-mannered-parti-colored portfolio is closely __________. 
A. 0.80
B. 1.13
C. 1.25
D. 1.56
E. none of the aggravate

17. Consider the solitary-element APT. Stocks A and B accept expected requites of 15% and 18%, respectively. The betray-playing trounce of requite is 6%. Supply B has a beta of 1.0. If arbitrage opportunities are unwavering out, supply A has a beta of __________. 
A. 0.67
B. 1.00
C. 1.30
D. 1.69
E. none of the aggravate 

 

18. Consider the multielement APT after a while two elements. Supply A has an expected requite of 16.4%, a beta of 1.4 on element 1 and a beta of .8 on element 2. The betray enhancement on the element 1 portfolio is 3%. The betray-playing trounce of requite is 6%. What is the betray-enhancement on element 2 if no arbitrage opportunities departure? 
A. 2%
B. 3%
C. 4%
D. 7.75%
E. none of the aggravate 

19. Consider the multielement design APT after a while two elements. Portfolio A has a beta of 0.75 on element 1 and a beta of 1.25 on element 2. The betray enhancements on the element 1 and element 2 portfolios are 1% and 7%, respectively. The betray-playing trounce of requite is 7%. The expected requite on portfolio A is __________ if no arbitrage opportunities insist. 
A. 13.5%
B. 15.0%
C. 16.5%
D. 23.0%
E. none of the aggravate

21. Consider a one-element dispensation. Portfolio A has a beta of 1.0 on the element and portfolio B has a beta of 2.0 on the element. The expected requites on portfolios A and B are 11% and 17%, respectively. Assume that the betray-playing trounce is 6% and that arbitrage opportunities insist. Suppose you endueed $100,000 in the betray-playing asset, $100,000 in portfolio B, and sold limited $200,000 of portfolio A. Your expected melioratement from this strategy would be ______________. 
A. -$1,000
B. $0
C. $1,000
D. $2,000
E. none of the aggravate

22. Consider the one-element APT. Assume that two portfolios, A and B, are well-mannered-mannered parti-colored. The betas of portfolios A and B are 1.0 and 1.5, respectively. The expected requites on portfolios A and B are 19% and 24%, respectively. Assuming no arbitrage opportunities insist, the betray-playing trounce of requite must be ____________. 
A. 4.0%
B. 9.0%
C. 14.0%
D. 16.5%
E. none of the aggravate

There are three supplys, A, B, and C. You can either endue in these supplys or limited dispose-of them. There are three feasible states of regularity for economic augmentation in the upcoming year; economic augmentation may be vigorous, dispassionate, or feeble. The requites for the upcoming year on supplys A, B, and C for each of these states of regularity are absorbed below:

  

 25. If you endueed in an resembling gravityed portfolio of supplys A and B, your portfolio requite would be ___________ if economic augmentation were dispassionate. 
A. 3.0%
B. 14.5%
C. 15.5%
D. 16.0%
E. none of the aggravate

26. If you endueed in an resembling gravityed portfolio of supplys A and C, your portfolio requite would be ____________ if economic augmentation was vigorous. 
A. 17.0%
B. 22.5%
C. 30.0%
D. 30.5%
E. none of the aggravate

 

 

27. If you endueed in an resembling gravityed portfolio of supplys B and C, your portfolio requite would be _____________ if economic augmentation was feeble. 
A. -2.5%
B. 0.5%
C. 3.0%
D. 11.0%
E. none of the aggravate
 

28. If you wanted to siege custom of a betray-playing arbitrage turn, you should siege a limited comcompose in _________ and a hanker comcompose in an resembling gravityed portfolio of _______. 
A. A, B and C
B. B, A and C
C. C, A and B
D. A and B, C
E. none of the aggravate

 

Consider the multielement APT. There are two stubborn economic elements, F1 and F2. The betray-playing trounce of requite is 6%. The forthcoming notice is serviceable encircling two well-mannered-parti-colored portfolios:
  

 29. Assuming no arbitrage opportunities insist, the betray enhancement on the element F1 portfolio should be __________. 
A. 3%
B. 4%
C. 5%
D. 6%
E. none of the aggravate

 

31. A nothing-bombardment portfolio after a while a unconditional expected requite arises when _________. 
A. an endueor has downside betray barely
B. the law of charges is not violated
C. the turn set is not tangent to the chief allocation continuity
D. a betray-playing arbitrage turn insists
E. none of the aggravate 

 

32. An endueor conquer siege as liberal a comcompose as feasible when an formgravity charge intercommunity is violated. This is an stance of _________. 
A. a preponderance argument
B. the mean-antagonism procureingness frontier
C. a betray-playing arbitrage
D. the chief asset pricing design
E. none of the aggravate 

 

33. The APT differs from the CAPM accordingly the APT _________. 
A. places past marrow on negotiate betray
B. minimizes the signification of diversification
C. recognizes multiple spasmodic betray elements
D. recognizes multiple disconnected betray elements
E. none of the aggravate

34. The indication of the APT that offers the pristine virtual custom aggravate the CAPM is the ______________. 
A. use of distinct elements instead of a solitary negotiate renunciation to decipher the betray-requite intercommunity
B. identification of anticipated changes in genesis, inflation and promise constitution as key elements in deciphering the betray-requite intercommunity
C. superior bulk of the betray-playing trounce of requite aggravate unromantic duration conclusions
D. variability of coefficients of sensitivity to the APT elements for a absorbed asset aggravate duration
E. none of the aggravate

35. In provisions of the betray/requite intercommunity 
A. barely element betray commands a betray enhancement in negotiate formweight.
B. barely disconnected betray is connected to expected requites.
C. barely nondisconnected betray is connected to expected requites.
D. A and B.
E. A and C.

36. The forthcoming elements potentiality interest supply requites: 
A. the concern cycle.
B. interest trounce fluctuations.
C. inflation trounces.
D. all of the aggravate.
E. none of the aggravate

 

 

38. Portfolio A has expected requite of 10% and banner flexuosity of 19%. Portfolio B has expected requite of 12% and banner flexuosity of 17%. Rational endueors conquer 
A. Borrow at the betray playing trounce and buy A.
B. Sell A limited and buy B.
C. Sell B limited and buy A.
D. Borrow at the betray playing trounce and buy B.
E. Lend at the betray playing trounce and buy B.

 

39. An gravityy dissent among CAPM and APT is 
A. CAPM depends on betray-requite preponderance; APT depends on a no arbitrage requisite.
B. CAPM assumes numerous feeble changes are required to produce the negotiate end to formweight; APT assumes a few liberal changes are required to produce the negotiate end to formweight.
C. implications for charges ascititious from CAPM arguments are vigorouser than charges ascititious from APT arguments.
D. all of the aggravate are gentleman.
E. both A and B are gentleman.

 

40. A functional who searches for mispriced securities in point areas such as merger-target supplys, rather than one who investigates severe (risk-free) arbitrage opportunities is intent in 
A. pure arbitrage.
B. betray arbitrage.
C. option arbitrage.
D. makegravity arbitrage.
E. none of the aggravate.

 

41. In the texture of the Arbitrage Pricing Theory, as a well-mannered-parti-colored portfolio becomes liberalr its nondisconnected betray approaches 
A. one.
B. infinity.
C. zero.
D. negative one.
E. none of the aggravate.

 

42. A well-mannered-parti-colored portfolio is defined as 
A. one that is parti-colored aggravate a liberal abundance compute of securities that the nondisconnected antagonism is essentially nothing.
B. one that contains securities from at meanest three unanalogous assiduity sectors.
C. a portfolio whose element beta resemblings 1.0.
D. a portfolio that is resembling gravityed.
E. all of the aggravate. 

 

43. The APT requires a benchmark portfolio 
A. that is resembling to the gentleman negotiate portfolio.
B. that contains all securities in symmetry to their negotiate appreciates.
C. that deficiency not be well-mannered-diversified.
D. that is well-mannered-parti-colored and lies on the SML.
E. that is unobservable.
 

44. Imposing the no-arbitrage requisite on a solitary-element deposit negotiate implies which of the forthcoming announcements?
I) the expected requite-beta intercommunity is maintained for all but a feeble compute of well-mannered-parti-colored portfolios.
II) the expected requite-beta intercommunity is maintained for all well-mannered-parti-colored portfolios.
III) the expected requite-beta intercommunity is maintained for all but a feeble compute of indivisible securities.
IV) the expected requite-beta intercommunity is maintained for all indivisible securities. 

46. The promise "arbitrage" refers to 
A. buying low and dispose-ofing elevated.
B. limited dispose-ofing elevated and buying low.
C. earning betray-playing economic melioratements.
D. negotiating for auspicious brokerage fees.
E. hedging your portfolio through the use of options.

 

47. To siege custom of an arbitrage turn, an endueor would
I) fabricate a nothing enduement portfolio that conquer surrender a enduring melioratement.
II) fabricate a nothing beta enduement portfolio that conquer surrender a enduring melioratement.
III) form concomitant trades in two negotiates after a whileout any net enduement.
IV) limited dispose-of the asset in the beggarly negotiate and buy it in the elevated-priced negotiate. 

 

48. The element F in the APT design denotes 
A. firm-point betray.
B. the sensitivity of the fast to that element.
C. a element that interests all deposit requites.
D. the flexuosity from its expected appreciate of a element that interests all deposit requites.
E. a stray totality of requite attributable to fast events.

49. In the APT design, what is the nondisconnected banner flexuosity of an resembling-weighted portfolio that has an mean appreciate of s(ei) resembling to 25% and 50 securities? 
A. 12.5%
B. 625%
C. 0.5%
D. 3.54%
E. 14.59% 

 

 

53. Which of the forthcoming is gentleman encircling the deposit negotiate continuity (SML) ascititious from the APT? 
A. The SML has a downward prosper.
B. The SML for the APT shows expected requite in relative to portfolio banner flexuosity.
C. The SML for the APT has an catch resembling to the expected requite on the negotiate portfolio.
D. The benchmark portfolio for the SML may be any well-mannered-parti-colored portfolio.
E. The SML is not applicable for the APT.
 

54. Which of the forthcoming is falsity encircling the deposit negotiate continuity (SML) ascititious from the APT? 
A. The SML has a downward prosper.
B. The SML for the APT shows expected requite in relative to portfolio banner flexuosity.
C. The SML for the APT has an catch resembling to the expected requite on the negotiate portfolio.
D. The benchmark portfolio for the SML may be any well-mannered-parti-colored portfolio.
E. A, B, and C are falsity.

 

55. If arbitrage opportunities are to be unwavering out, each well-mannered-parti-colored portfolio's expected debauchery requite must be 
A. inversely symmetryal to the betray-playing trounce.
B. inversely symmetryal to its banner flexuosity.
C. proportional to its gravity in the negotiate portfolio.
D. proportional to its banner flexuosity.
E. proportional to its beta coefficient.

 

56. Suppose you are instituted after a while two element portfolios, Portfolio 1 and Portfolio 2. The portfolios accept expected requites of 15% and 6%, respectively. Based on this notice, what would be the expected requite on well-mannered-parti-colored portfolio A, if A has a beta of 0.80 on the pristine element and 0.50 on the succor element? The betray-playing trounce is 3%. 
A. 15.2%
B. 14.1%
C. 13.3%
D. 10.7%
E. 8.4% 

 

58. In a element design, the requite on a supply in a point conclusion conquer be connected to 
A. element betray.
B. non-element betray.
C. banner flexuosity of requites.
D. both A and B are gentleman.
E. none of the aggravate are gentleman.
 

59. Which of the forthcoming elements did Chen, Roll and Ross not embrace in their multielement design? 
A. Change in industrial genesis
B. Change in expected inflation
C. Change in abrupt inflation
D. Excess requite of hanker-promise council bonds aggravate T-bills
E. All of the aggravate elements were embraced in their design.
 

61. Which of the forthcoming elements were used by Fama and French in their multi-element design? 
A. Return on the negotiate renunciation
B. Excess requite of feeble supplys aggravate liberal supplys.
C. Excess requite of elevated book-to-negotiate supplys aggravate low book-to-negotiate supplys.
D. All of the aggravate elements were embraced in their design.
E. None of the aggravate elements were embraced in their design. 

63. Which of the forthcoming elements did Merton propose as a likely fountain of casualty that potentiality interest deposit requites? 
A. uncertainties in strive allowance.
B. prices of gravityy decrement issue.
C. book-to-negotiate ratios.
D. changes in forthcoming enduement opportunities.
E. A, B, and D.

64. Black argues that elapsed betray enhancements on fast-idiosyncrasy variables, such as those illustrative by Fama and French, are problematic accordingly ________. 
A. they may upshot from postulates snooping.
B. they are fountains of disconnected betray.
C. they can be deciphered by deposit idiosyncrasy continuitys.
D. they are past misapply for a solitary-element design.
E. they are macroeconomic elements.
 

65. Multielement designs investigate to meliorate the achievement of the solitary-renunciation design by 
A. modeling the disconnected constituent of fast requites in elder particular.
B. incorporating fast-point constituents into the pricing design.
C. allowing for multiple economic elements to accept unanalogousial effects
D. all of the aggravate are gentleman.
E. none of the aggravate are gentleman.

66. Multielement designs such as the one fabricateed by Chen, Roll, and Ross, can meliorate recount issue' requites by 
A. expanding further one element to denote fountains of disconnected betray.
B. using variables that are easier to expect ex ante.
C. calculating beta coefficients by an choice order.
D. using barely supplys after a while proportionately steady requites.
E. ignoring fast-point betray.

Order a unique copy of this paper
(550 words)

Approximate price: $22

Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
$26
The price is based on these factors:
Academic level
Number of pages
Urgency