16. A point on the capital market line (CML) represents: a. A complete portfolio consisting of risk free asset and tangency portfolio b. A fairly priced security or portfolio c. Beta d. Sharpe ratio of the tangency portfolio 17. Consider the multi-factor APT with two factors. Portfolio A has a beta of 0. 5 on factor 1 and a beta of 1.25 on factor 2 . The risk premiums on the factors 1 and 2 portfolios are 1% and 7% respectively. The risk-free rate of return is 7%. The expected return on portfolio A is if no arbitrage opportunities exist. a. b. c. d. 13.5% 15.0% 16.25% 23.0% 18. A portfolio consists of the following two funds. Fund Expected return Market value $15,000 S35,000 Standard deviation 13% 7% 6% The correlation between returns of A and B is 0.36. Risk free rate is 3%. What is the Sharpe ratio of the portfolio? a. 0.42 b. 0.55 c. 0.66 d. 0.75 19. You have the following information: Portfolio Average Return Standard Deviation Beta 14.7% 8.8 11.2 18.6% 14.2 16.0 1.47 0.78 1.22 The risk-free rate is 4.5% and the market risk premium is 7%. What is Jensen's alpha of a portfolio comprised of40% portfolio A and 60% of portfolio C? a. -2.01% b. -1.76% c. -1.35% d-1.14% 20. Which of the following statement(s) describe the characteristics of the mimicking portfolio of the M2 measure? I. Mimicking portfolio consists of the risky portfolio under evaluation and risk free asset. II. Mimicking portfolio has the same beta as market portfolio. III. Mimicking portfolio is a complete portfolio. IV. Mimicking portfolio has the same standard deviation as market portfolio