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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Definitions:

Somatic Symptom Disorder

A mental disorder characterized by an excessive focus on physical symptoms — like pain or fatigue — that causes significant emotional distress and problems functioning.

Type A

Refers to a personality type characterized by high competitiveness, self-imposed stress, and a sense of urgency.

Type B

A personality type characterized by a relaxed, less competitive approach and lower levels of stress.

Health Effects

The alterations in health or disease status resulting from exposure to a particular agent, lifestyle, or environmental condition.