10

According to the capital asset pricing model, a security with a _________.

		zero alpha is a good buy
		positive alpha is considered underpriced
		positive alpha is considered overpriced
		negative alpha is considered a good buy

Question 11

Arbitrage is based on the idea that _________.

		In the equilibrium, securities with similar risk should sell at different prices
		market price is always right at any point in time, therefore leaving arbitrageurs no opportunities to explore
		the expected returns from equally risky assets are different
		In the equilibrium, assets with identical risks should earn the same expected rate of return