1)If you are using R- square as a measure of the goodness of fit between predicted variance for a particular security over actual variance of a security. What should be the R- square if this particular security has no firm specific risk?

A) 0

B) Beta

C)1

D)Alpha

2) What does it mean if you have a positive Alpha stock?

A) This suggests that this stock is a friendly leader of a dog pack

B) This suggests that the stock is mispriced and should be priced higher

C) This suggests that the stock is mispriced and should be priced lower

D) Positive Alpha stocks cannot exist