Part I. (Sentence Correction) All of the following statements are false. Please change the incorrect parts to make them true. DO NOT negate the sentence, unless necessary.

1. Both the CAPM and APT assume that one specific factor explains security returns.

2. Both the CAPM and APT assume that investors hold the market portfolio as their choice of risky assets.

3. According to the APT, there is a linear relationship between expected return and unsystematic risk(s).

4. Investors may exploit arbitrage opportunities by buying long fairly-priced assets and selling short underpriced assets.

5. In the APT model, the identity of all the factors is known.

6. The goal of an active portfolio is to track the index as closely as possible.

7. Value stocks would have high price/book.