1. An important conceptual difference between the arbitrage pricing theory (APT) and the capital asset pricing model (CAPM) is that the APT ______________.

   		does not recognize market risk
   		recognizes more than one unsystematic risk factors
   		recognizes only one systematic risk factor
   		recognizes more than one systematic risk factor
   		none of the above

1. Suppose the TRUE model of expected returns is the Fama French 3 factor model. For a particular security, you calculate a non-zero alpha using the CAPM index model. Which of the following may be true?

   		You have discovered an arbitrage opportunity.
   		You have encountered an omitted factor problem.
   		A and B may both true.
   		A and B are both not true.