4. Which of the following are assumptions of the capital asset pricing model? (Points : 3) Funds can be borrowed or lent in unlimited quantities at risk-free rate. The objective of all investors is to maximize their expected utility over the same one-period timeframe using the same basis for evaluating investments. There are no taxes or transaction costs associated with any investment. All of the above are correct assumptions. 5. (TCO 7) A good way to minimize risk and receive an optimum return on your portfolio is: (Points : 3) through diversification. to buy only risk-free securities. through blue-chip stock purchases only. through junk-bonds. 6. (TCO 7) Assume a portfolio has the possibility of returning 7%, 8%, 10%, or 12%, with the likelihood of 20%, 30%, 25%, and 25%, respectively. The expected value of the portfolio is: (Points : 3) 10.0%. 9.0%. 9.3%. 9.25%. 7. (TCO 7) If the market rate of return is 10% and the beta on a particular stock is 1.00, the return on the stock will be: (Points : 3) greater than 10%. 10%. less than 10%. dependent on some other factor. 8. (TCO 7) For two investments with a correlation coefficient (rij) less than +1, the portfolio standard deviation will be __________ the weighted average of the individual investments' standard deviation. (Points : 3) more than less than equal to zero compared to 9. (TCO 7) The capital asset pricing model (CAPM) takes off where the _________ concluded. (Points : 3) security market line capital market line efficient frontier and Markowitz portfolio theory arbitrage pricing theory 10. (TCO 7) Using the formula for the security market line (Formula 21-7), if the risk-free rate (RF) is 6%, the market rate of return (KM) is 12%, and the beta (bi) is 1.2, compute the anticipated return for stock i (Ki). (Points : 3) 20.4% 16.33% 13.64% 13.2%