Exhibit 9.1 Use the Information Below for the Following Problem(S)

question 33

Multiple Choice

Exhibit 9.1
Use the Information Below for the Following Problem(S)
(1) Capital markets are perfectly competitive.
(2) Quadratic utility function.
(3) Investors prefer more wealth to less wealth with certainty.
(4) Normally distributed security returns.
(5) Representation as a K factor model.
(6) A market portfolio that is mean-variance efficient.
-Refer to Exhibit 9.1.In the list above,which are not assumptions of the Arbitrage Pricing model?

• A) (1) and (3)
• B) (1), (2), and (3)
• C) (1), (2), and (5)
• D) (2), (4), and (6)
• E) All six are assumptions

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Definitions:

Yield-To-Maturity

The total return anticipated on a bond if the bond is held until its maturity date, considering all interest payments and the principal repayment.

Zero-Coupon Bond

A debt security that doesn't pay periodic interest but is issued at a substantial discount to its face value, maturing at that face value.

Face Value

The nominal or dollar value printed on a bond, stock, or other financial instrument, representing the value at issuance and the value to be repaid at maturity.

Zero-Coupon Bond

A financial security that does not pay periodic interest but is sold at a discount from its face value, and the investor receives the face value at maturity.