Please mark all of the following statements that you believe to be true and leave unmarked those that are false. You will receive partial credit for this question, i$.$e$.,$ two points for each statement you correctly mark or correctly leave unmarked.

$1.$

According to the CAPM, the tangent portfolio of all investors is identical to the market portfolio because investors have perfect foresight about future expected returns, volatilities, and correlations.

$2.$

A stock's beta is a measure of its exposure to systematic risk relative to the market portfolio.

$3.$

The central equation of the CAPM is:

text E end text open parentheses R subscript i close parentheses equals r subscript f plus beta subscript i cross times open square brackets text E end text open parentheses R subscript m close parentheses minus r subscript f close square brackets

$4.$

In a $\backslash$mu $-\backslash$sigma plot $($mu$-$sigma plot$),$ individual stocks are too far to the right because their horizontal coordinate $\backslash$sigma $($standard deviation$/$volatility$)$ includes diversifiable risk that is irrelevant to the stock's $\backslash$mu $($expected return$).$

$5.$

The weighted average cost of capital of a firm is used to estimate its return on assets, which in turn can be used as a discount factor for NPV calculations.