the economics of money, banking, and financial markets

146 #

© 2014 Pearson Canada Inc.#

8. 
   

   In contrast to the CAPM, the APT assumes that there can be several sources of ____ that
   cannot be eliminated through diversification.
   A) nonsystematic risk
   B) systematic risk
   C) credit risk
   D) arbitrary risk
   Answer: B
   Diff: 1 Type: MC Page Ref: 5A1.- 8
   Topic: Questions for Web Appendix on Asset Pricing
   Skill: Recall
   Objective List: Appendix: Models of Asset Pricing

   
   


9. 
   

   Both the CAPM and APT suggest that an asset should be priced so that it has a higher
   expected return ____.
   A) when it has a greater systematic risk
   B) when it has a greater risk in isolation
   C) when it has a lower systematic risk
   D) when it has a lower systematic risk and a lower risk in isolation
   Answer: A
   Diff: 1 Type: MC Page Ref: 5A1- 8 - 5A1- 12
   Topic: Questions for Web Appendix on Asset Pricing
   Skill: Applied
   Objective List: Appendix: Models of Asset Pricing

   
   


10. 
    

    A limitation of the CAPM is the assumption that ____.
    A) there are multiple sources of systematic risk
    B) there is a single source of systematic risk
    C) investors have different assessments of expected returns and standard deviations
    D) they cannot borrow freely at the risk-free rate
    Answer: B
    Diff: 2 Type: MC Page Ref: 5A.1- 11
    Topic: Questions for Web Appendix on Asset Pricing
    Skill: Recall
    Objective List: Appendix: Models of Asset Pricing