投资学题库Chap010.doc

Chapter 10Arbitrage Pricing Theory and Multifactor Models of Risk and ReturnMultiple 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 been 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 exist?A.9.26%B.3%C.4%D.7.75%3.In a multifactor APT model, the coefficients on the macro factors are often calledA.systemic risk.B.factor sensitivities.C.idiosyncratic risk.D.factor betas.E.factor sensitivities and factor betas.4.In a multifactor APT model, the coefficients on the macro factors are often calledA.systemic risk.B.firm-specific risk.C.idiosyncratic risk.D.factor betas.5.In a multifactor APT model, the coefficients on the macro factors are often calledA.systemic risk.B.firm-specific risk.C.idiosyncratic risk.D.factor loadings.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.None of the options is a true statement.7.An arbitrage opportunity exists if an investor can construct a _ investment portfolio that will yield a sure profit.A.positiveB.negativeC.zeroD.All of the optionsE.None of the options8.The APT was developed in 1976 byA.Lintner.B.Modigliani and Miller.C.Ross.D.Sharpe.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.factorB.marketC.indexD.factor and marketE.factor, market, and index10.The exploitation of security mispricing in such a way that risk-free economic profits may be earned is calledA.arbitrage.B.capital asset pricing.C.factoring.D.fundamental analysis.E.None of the options11.In developing the APT, Ross assumed that uncertainty in asset returns was a result ofA.a common macroeconomic factor.B.firm-specific factors.C.pricing error.D.a common macroeconomic factor and firm-specific factors.12.The _ provides an unequivocal statement on the expected return-beta relationship for all assets, whereas the _ implies that this relationship holds for all but perhaps a small number of securities.A.APT, CAPMB.APT, OPMC.CAPM, APTD.CAPM, OPM13.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, AB.A, BC.B, AD.B, BE.A, the riskless asset14.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 _.A.A, AB.A, BC.B, AD.B, B15.Consider the one-factor APT. The variance of returns on the factor portfolio is 6%. The beta of a well-diversified portfolio on the factor is 1.1. The variance of returns on the well-diversified portfolio is approximatelyA.3.6%.B.6.0%.C.7.3%.D.10.1%.16.Consider the one-factor APT. The standard deviation of returns on a well-diversified portfolio is 18%. The standard deviation on the factor portfolio is 16%. The beta of the well-diversified portfolio is approximatelyA.0.80.B.1.13.C.1.25.D.1.56.17.Consider the single-factor APT. Stocks A and B have expected returns of 15% and 18%, respectively. The risk-free rate of return is 6%. Stock B has a beta of 1.0. If arbitrage opportunities are ruled out, stock A has a beta ofA.0.67.B.1.00.C.1.30.D.1.69.E.0.75.18.Consider the multifactor APT with two factors. Stock A has an expected return of 16.4%, a beta of 1.4 on factor 1 and a beta of .8 on factor 2. The risk premium on the factor 1 portfolio is 3%. The risk-free rate of return is 6%. What is the risk-premium on factor 2 if no arbitrage opportunities exist?A.2%B.3%C.4%D.7.75%19.Consider the multifactor model APT with two factors. Portfolio A has a beta of 0.75 on factor 1 and a beta of 1.25 on factor 2. The risk premiums on the factor 1 and factor 2 portfolios are 1% and 7%, respectively. The risk-free rate of return is 7%. The expected return on portfolio A is _ if no arbitrage opportunities exist.A.13.5%B.15.0%C.16.5%D.23.0%20.Consider the multifactor APT with two factors. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 6%, respectively. Stock A has a beta of 1.2 on factor 1, and a beta of 0.7 on factor 2. The expected return on stock A is 17%. If no arbitrage opportunities exist, the risk-free rate of return isA.6.0%.B.6.5%.C.6.8%.D.7.4%.21.Consider a one-factor economy. Portfolio A has a beta of 1.0 on the factor and portfolio B has a beta of 2.0 on the factor. The expected returns on portfolios A and B are 11% and 17%, respectively. Assume that the risk-free rate is 6% and that arbitrage opportunities exist. Suppose you invested $100,000 in the risk-free asset, $100,000 in portfolio B, and sold short $200,000 of portfolio A. Your expected profit from this strategy would beA.-$1,000.B.$0.C.$1,000.D.$2,000.22.Consider the one-factor APT. Assume that two portfolios, A and B, are well diversified. The betas of portfolios A and B are 1.0 and 1.5, respectively. The expected returns on portfolios A and B are 19% and 24%, respectively. Assuming no arbitrage opportunities exist, the risk-free rate of return must beA.4.0%.B.9.0%.C.14.0%.D.16.5%.23.Consider the multifactor APT. The risk premiums on the factor 1 and factor 2 portfolios are 5% and 3%, respectively. The risk-free rate of return is 10%. Stock A has an expected return of 19% and a beta on factor 1 of 0.8. Stock A has a beta on factor 2 ofA.1.33.B.1.50.C.1.67.D.2.00.24.Consider the single factor APT. Portfolios A and B have expected returns of 14% and 18%, respectively. The risk-free rate of return is 7%. Portfolio A has a beta of 0.7. If arbitrage opportunities are ruled out, portfolio B must have a beta ofA.0.45.B.1.00.C.1.10.D.1.22.E.None of the options25.There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the upcoming year (each equally likely to occur); economic growth may be strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:If you invested in an equally weighted portfolio of stocks A and B, your portfolio return would be _ if economic growth were moderate.A.3.0%B.14.5%C.15.5%D.16.0%26.There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the upcoming year (each equally likely to occur); economic growth may be strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:If you invested in an equally weighted portfolio of stocks A and C, your portfolio return would be _ if economic growth was strong.A.17.0%B.22.5%C.30.0%D.30.5%27.There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the upcoming year (each equally likely to occur); economic growth may be strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:If you invested in an equally weighted portfolio of stocks B and C, your portfolio return would be _ if economic growth was weak.A.-2.5%B.0.5%C.3.0%D.11.0%28.There are three stocks, A, B, and C. You can either invest in these stocks or short sell them. There are three possible states of nature for economic growth in the upcoming year (each equally likely to occur); economic growth may be strong, moderate, or weak. The returns for the upcoming year on stocks A, B, and C for each of these states of nature are given below:If you wanted to take advantage of a risk-free arbitrage opportunity, you should take a short position in _ and a long position in an equally weighted portfolio of _.A.A, B and CB.B, A and CC.C, A and BD.A and B, C29.Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios:Assuming no arbitrage opportunities exist, the risk premium on the factor F1 portfolio should beA.3%.B.4%.C.5%.D.6%.30.Consider the multifactor APT. There are two independent economic factors, F1 and F2. The risk-free rate of return is 6%. The following information is available about two well-diversified portfolios:Assuming no arbitrage opportunities exist, the risk premium on the factor F2 portfolio should beA.3%.B.4%.C.5%.D.6%.31.A zero-investment portfolio with a positive expected return arises whenA.an investor has downside risk only.B.the law of prices is not violated.C.the opportunity set is not tangent to the capital allocation line.D.a risk-free arbitrage opportunity exists.32.An investor will take as large a position as possible when an equilibrium price relationship is violated. This is an example ofA.a dominance argument.B.the mean-variance efficiency frontier.C.a risk-free arbitrage.D.the capital asset pricing model.33.The APT differs from the CAPM because the APTA.places more emphasis on market risk.B.minimizes the importance of diversification.C.recognizes multiple unsystematic risk factors.D.recognizes multiple systematic risk factors.34.The feature of the APT that offers the greatest potential advantage over the CAPM is theA.use of several factors instead of a single market index to explain the risk-return relationship.B.identification of anticipated changes in production, inflation, and term structure as key factors in explaining the risk-return relationship.C.superior measurement of the risk-free rate of return over historical time periods.D.variability of coefficients of sensitivity to the APT factors for a given asset over time.E.None of the options35.In terms of the risk/return relationship in the APT,A.only factor risk commands a risk premium in market equilibrium.B.only systematic risk is related to expected returns.C.only nonsystematic risk is related to expected returns.D.only factor risk commands a risk premium in market equilibrium and only systematic risk is related to expected returns.E.only factor risk commands a risk premium in market equilibrium and only nonsystematic risk is related to expected returns.36.The following factors might affect stock returnsA.the business cycle.B.interest rate fluctuations.C.inflation rates.D.All of the options37.Advantage(s) of the APT is(are)A.that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios.B.that the model does not require a specific benchmark market portfolio.C.that risk need not be considered.D.that the model provides specific guidance concerning the determination of the risk premiums on the factor portfolios and that the model does not require a specific benchmark market portfolio.E.that the model does not require a specific benchmark market portfolio and that risk need not be considered.38.Portfolio A has expected return of 10% and standard deviation of 19%. Portfolio B has expected return of 12% and standard deviation of 17%. Rational investors willA.borrow at the risk-free rate and buy A.B.sell A short and buy B.C.sell B short and buy A.D.borrow at the risk-free rate and buy B.E.lend at the risk-free rate and buy B.39.An important difference between CAPM and APT isA.CAPM depends on risk-return dominance; APT depends on a no arbitrage condition.B.CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.C.implications for prices derived from CAPM arguments are stronger than prices derived from APT arguments.D.All of the options are true.E.Both CAPM depends on risk-return dominance; APT depends on a no arbitrage condition and CAPM assumes many small changes are required to bring the market back to equilibrium; APT assumes a few large changes are required to bring the market back to equilibrium.40.A professional who searches for mispriced securities in specific areas such as merger-target stocks, rather than one who seeks strict (risk-free) arbitrage opportunities is engaged inA.pure arbitrage.B.risk arbitrage.C.option arbitrage.D.equilibrium arbitrage.41.In the context of the Arbitrage Pricing Theory, as a well-diversified portfolio becomes larger its nonsystematic risk approachesA.one.B.infinity.C.zero.D.negative one.42.A well-diversified portfolio is defined asA.one that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero.B.one that contains securities from at least three different industry sectors.C.a portfolio whose factor beta equals 1.0.D.a portfolio that is equally weighted.43.The APT requires a benchmark portfolioA.that is equal to the true market portfolio.B.that contains all securities in proportion to their market values.C.that need not be well-diversified.D.that is well-diversified and lies on the SML.E.that is unobservable.44.Imposing the no-arbitrage condition on a single-factor security market implies which of the following statements?I) The expected return-beta relationship is maintained for all but a small number of well-diversified portfolios.II) The expected return-beta relationship is maintained for all well-diversified portfolios.III) The expected return-beta relationship is maintained for all but a small number of individual securities.IV) The expected return-beta relationship is maintained for all individual securities.A.I and IIIB.I and IVC.II and IIID.II and IVE.Only I is correct.45.Consider a well-diversified portfolio, A, in a two-factor economy. The risk-free rate is 6%, the risk premium on the first factor portfolio is 4% and the risk premium on the second factor portfolio is 3%. If portfolio A has a beta of 1.2 on the first factor and .8 on the second factor, what is its expected return?A.7.0%B.8.0%C.9.2%D.13.0%E.13.2%46.The term arbitrage refers toA.buying low and selling high.B.short selling high and buying low.C.earning risk-free economic profits.D.negotiating for favorable brokerage fees.E.hedging your portfolio through the use of options.47.To take advantage of an arbitrage opportunity, an investor wouldI) construct a zero investment portfolio that will yield a sure profit.II) construct a zero beta investment portfolio that will yield a sure profit.III) make simultaneous trades in two markets without any net investment.IV) short sell the asset in the low-priced market and buy it in the high-priced market.A.I and IVB.I and IIIC.II and IIID.I, III, and IVE.II, III, and IV48.The factor F in the APT model representsA.firm-specific risk.B.the sensitivity of the firm to that factor.C.a factor that affects all security returns.D.the deviation from its expected value of a factor that affects all security returns.E.a random amount of return at