According to the capital asset pricing model, fairly priced securities have

a$)$ negative betas

b$)$ positive alphas

c$)$ positive betas

d$)$ zero alphas

Consider the single factor APT. Portfolio A has a beta of $1\mathrm{.}3$ and an expected return

of $21\%.$ Portfolio B has a beta of $0\mathrm{.}7$ and an expected return of $17\%.$ The risk$-$free

rate of return is $8\%.$ If you wanted to take advantage of an arbitrage opportunity, you

should take a short position in portfolio and a long position in portfolio

a$)A$;$A$

b$)A$;$B$

c$)B$;$A$

d$)$ B; B

Security A has an expected rate of return of $12\%$ and a beta of $1\mathrm{.}1.$ The market

expected rate of return is $8\%,$ and the risk$-$free rate is $5\%.$ The alpha of the stock is

a$)-1\mathrm{.}7\%$

b$)3\mathrm{.}7\%$

c$)5\mathrm{.}5\%$

d$)8\mathrm{.}7\%$

A stock's alpha measures the stock's

a$)$ expected return

b$)$ abnormal return

c$)$ excess return

d$)$ residual return