6. Which of the following asset classes has historically had the highest returns and standard deviation? A. Small-cap stocks. B. Large-cap stocks. C. Long-term corporate bonds. 7. A portfolio was created by investing 80% of the funds in Asset A (standard deviation = 15%) and the balance of the funds in the risk-free interest rate. What is the portfolio's standard deviation? A. There is not enough information to calculate the standard deviation of the portfolio. B. 12%. C. 15%. 8. A portfolio that plots below the Capital Market Line (CML) but above the Security Market Line (SML) is: A. efficient and mispriced. B. inefficient and underpriced. C. inefficient and overpriced. 9. You are in the process of constructing a suitable portfolio based on the Investment Policy Statement (IPS) of your client. A colleague of yours argues that Asset A plots on the Capital Market Line (CML) and above the Security Market Line (SML). Should you buy Asset A for your client? A. Yes, Asset A is certainly underpriced. B. No, Asset A is too risky for your client. C. No, your colleague talks nonsense. 10. The CAPM theory holds if the: A. Jensen's alpha is equal to zero for at least one asset or portfolio. B. Fama's alpha is equal to zero for any given asset or portfolio. C. Jensen's alpha is equal to zero for any given asset or portfolio