5. When comparing the marginal benefits of active and passive portfolio management, the logical conclusion of marginal analysis is that:

a. Passive portfolio management outperforms active portfolio management.

b. More wealth should move from active to passive portfolios.

c. Investment in active and passive portfolios is well balanced.

d. Wealth should be divested from both active and passive portfolios.

6. The main elements of the relative valuation approach are: a. The valuation target and the relative performance measure. b. The target, the measure, the anchor, and the loss point. C. The relative valuation anchor, the valuation indicator and the valuation reference point. d. The valuation target, the comparison asset and the valuation measure. [5 marks] 7. APT replaced CAPM as the main asset pricing model because: a. Its assumptions are more realistic. b. APT is a generalised version of CAPM. c. It is easier to identify the factors driving asset returns with APT than with CAPM. d. CAPM's validity as a theoretical model was questioned by research evidence. [5 marks] 8. What does the Law of Large Numbers tell us about investment managers' performance? a. That great performance may sometimes come out of pure luck. b. That it is due to pure luck. c. That it requires a great deal of competence to overcome bad luck. d. That a manager's performance due to luck is inversely proportional to her performance achievement