Part A: True or False

Please conclude weather the following statement are true or false and give me your reasons $($You can explain by using knowledges learned from the class or

textbooks or any other empirical facts in the financial market. Don't use your

personal examples which is not representative enough.$).$

$1.$ The true Market Portfolio is represented by the Standard & Poor's $500$ Stock Index so it is perfectly correlated with the Standard & Poor's $500$ Stock Index.

$2.$ Since we know CAPM does not hold in the real financial market, it is useless to

investors.

$3.$Investors usually prefer purchasing in$-$the$-$money options since in$-$the money options are much cheaper than out$-$of$-$money options.

$4.$ In a bankruptcy, bond investors have priority over shareholders in claims on the company's asset so bond holders are less vulnerable. However, buying corporate bonds is not a kind of riskless investment.