QUESTION $20$

Test of the security market line suggest that Betas of individual securities are good estimators of future risk. True

False

QUESTION $21$

Use a two factor arbirtrage pricing theory $($APT$)$ model to find the return of a stock with the following data: risk free rate $=1\%$

market return $=3\%$

beta of stock to market risk $=1\mathrm{.}3$

GDP growth $=5\mathrm{.}95\%$

sensitivity of stock to GDP $=44$

A$.3\mathrm{.}97\%$

B$.4\mathrm{.}84\%$

C$.5\mathrm{.}78\%$

D$.6\mathrm{.}32\%$