Imposing the No-Arbitrage Condition on a Single-Factor Security Market Implies

question 2

Multiple Choice

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 III
• B)I and IV
• C)II and III
• D)II and IV

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