QUESTION 21

1. Which of the following are correct?

   		a. The expected return based on the CAPM varies in proportion to the beta and the market risk premium.
   		b. Portfolios below the SML are ideal because they are undervalued.
   		c. A borrowing portfolio will be less volatile than a lending portfolio.
   		d. The CAPM assumptions accurately reflect the reality of capital markets.

QUESTION 22

1. The level of risk tolerance is a measure of an investor's:

   		a. Ability to accept risk.
   		b. Ability and willingness to accept risk.
   		c. Time horizon and net worth.
   		d. Age and net worth.