If Arbitrage Opportunities Are to Be Ruled Out, Each Well-Diversified

question 11

Multiple Choice

If arbitrage opportunities are to be ruled out, each well-diversified portfolio's expected excess return must be

• A) inversely proportional to the risk-free rate.
• B) inversely proportional to its standard deviation.
• C) proportional to its weight in the market portfolio.
• D) proportional to its standard deviation.
• E) proportional to its beta coefficient.

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