Exhibit 7-7 USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) (1) Capital

question 131

Multiple Choice

Exhibit 7-7
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(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 7-7 In the list above which are assumptions of the Arbitrage Pricing Model?

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

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Definitions:

Steadily Rising Wages

A consistent increase in the amount of money earned by workers over a period of time.

Falling Prices

A situation in which the cost of goods and services decreases over time, which can result from factors like decreased demand or increased supply.

Mexican-American Identity

The cultural and national identity of Americans of Mexican descent, shaped by the history of Mexican-American relations and the blending of Mexican and American cultures.

American Southwest

A geographical region in the United States characterized by arid deserts, unique cultures, and significant historical landmarks.