4. The market risk, beta, of a security is equal to: The covariance between the security's return and the market return divided by the variance of the market's return. The covariance between the security and market returns divided by the standard deviation of the markets return. The variance of the security's returns divided by the covariance between the security and market returns. The variance of the security's returns divided by the variance of the markets return. The put call ratio equilibrium. None of the above a. b. c. d. e. f. 5. According to the CAPM, fairly priced securities have: a. Positive betas b. Zero alphas c. Negative betas d. Positive alphas e. Consistently outperformed the S and P 500 f. None of the above 6. The RF rate is 7%. The expected market rate of return is 15%. If you expect a stock with a beta of 1.3 to offer a rate of return of 12%, you should Buy the stock because it is overpriced. Sell short the stock because it is overpriced. Sell the stock short because it is underpriced. Buy the stock because it is underpriced None of the above options: the stock is fairly priced. a. b. c. d. e. 7. You invest $600 in a security with a beta of 1.2 and $400 in another security with a beta of .90 The beta of the resulting portfolio is: a. 1.40 b. 1.00 c. .36 d. 1.08 e. 1.12 8. 1.28