Question (70 points ). Are the following statements true or false? Provide a short justification for your answer. (You are evaluated on your justification.) Remember that a statement is false if any part of the statement is false . a) (10 points ). Suppose the CAPM holds . Suppose an asset A has a lower standard deviation than the market portfolio , that is, Then , the expected return on asset A must be lower than the expected return on the market portfolio. b) (10 points ). The CAPM states that returns are based on market risk . Thus , any two assets with the same correlation with the market must have the same risk premium (and thus the same expected return)- c) (10 points ). Suppose that you are a mean-variance optimizer. The risk-free rate is r . You can invest in 2 risky assets , with expected returns E It, 1, E It, 1. Suppose both risky assets have expected returns strictly lower than the risk-free rate: The risk -free asset mean -variance dominates both assets , so these risky assets do not expand your investment opportunity set. Thus, a mean-variance investor would invest her entire portfolio in the risk -free asset . d) (10 points ). Suppose arbitrage pricing theory holds , so returns of all assets are determined by their factor loadings on a small set of priced risk factors . The risk -free rate is r . Suppose two stocks, A and B, are perfectly positively correlated . Both stocks are risky : the return standard deviation of both is greater than o. If stock A has an expected return greater than the risk -free rate r , then stock B must also have an expected return greater than T. e) (10 points ). Suppose that the yield curve is upwards sloping, until time T. That is, spot rates T. ... T satisfy : T ,