Chapter 10
Arbitrage Pricing Theory and Multifactor Models of Risk and Return
ephMultiple Choice Questions
1. ___________ a relationship between expected return and risk.
A. APT stipulates
B. CAPM stipulates
C. Both CAPM and APT stipulate
D. Neither CAPM nor APT stipulate
E. No pricing model has found
2. Consider the multifactor APT with two factors. Stock A has an expected return of 17.6%, a beta of 1.45 on factor 1 and a beta of .86 on factor 2. The risk premium on the factor 1 portfolio is 3.2%. The risk-free rate of return is 5%. What is the risk-premium on factor 2 if no arbitrage opportunities exit?
A. 9.26%
B. 3%
C. 4%
D. 7.75%
E. 9.75%
3. In a multi-factor APT model, the coefficients on the macro factors are often called ______.
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A. systemic risk
B. factor nsitivities
C. idiosyncratic risk
D. factor betas
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E. both factor nsitivities and factor betas
4. In a multi-factor APT model, the coefficients on the macro factors are often called ______.
A. systemic risk
B. firm-specific risk
C. idiosyncratic risk
D. factor betas
availableE. unique risk
5. In a multi-factor APT model, the coefficients on the macro factors are often called ______.
A. systemic risk外套英语
B. firm-specific risk
C. idiosyncratic risk
D. factor loadings
E. unique risk
6. Which pricing model provides no guidance concerning the determination of the risk premium on factor portfolios?
A. The CAPM
B. The multifactor APT
C. Both the CAPM and the multifactor APT
D. Neither the CAPM nor the multifactor APT
E. No pricing model currently exists that provides guidance concerning the determination of the risk premium on any portfolio
7. An arbitrage opportunity exists if an investor can construct a __________ investment portfolio that will yield a sure profit.
A. small positive
B. small negative
C. zero
D. large positive
E. large negative
8. The APT was developed in 1976 by ____________.
A. Lintner
B. Modigliani and Miller
C. Ross
D. Sharpe
E. Fama
9. A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of the factors and a beta of 0 on any other factor.
A. factor
B. market
C. index
D. factor and market
E. factor, market, and index
10. The exploitation of curity mispricing in such a way that risk-free economic profits may be earned is called ___________.
A. arbitrage
B. capital ast pricing
C. factoring
D. fundamental analysis
E. technical analysis
11. In developing the APT, Ross assumed that uncertainty in ast returns was a result of
A. a common macroeconomic factor.
B. firm-specific factors.
C. pricing error.
D. neither common macroeconomic factors nor firm-specific factors.
企业英语培训E. both common macroeconomic factors and firm-specific factors.才学网
12. The ____________ provides an unequivocal statement on the expected return-beta relationship for all asts, whereas the _____________ implies that this relationship holds for all but perhaps a small number of curities.
A. APT; CAPM
B. APT; OPM
C. CAPM; APT
D. CAPM; OPM
E. APT and OPM; CAPM
13. Consider a single factor APT. Portfolio A has a beta of 1.0 and an expected return of 16%. Portfolio B has a beta of 0.8 and an expected return of 12%. The risk-free rate of return is 6%. 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; A
B. A; B
C. B; A
D. B; B
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E. A; the riskless ast
14. Consider the single factor APT. Portfolio A has a beta of 0.2 and an expected return of 13%. Portfolio B has a beta of 0.4 and an expected return of 15%. The risk-free 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 _________.
