Securities with returns that lie above the security market line are overvalued.

True

False

The error caused by NOT using the true market portfolio has become known as the

		portfolio deviation.
		CAPM shift.
		benchmark error.
		beta error.

Fama and French suggest a three factor model approach. Which of the following is not included in their approach?

		Excess returns to a broad market index
		Return differences between small-cap and large-cap portfolios
		Return differences between industry characteristics
		Return differences between value and growth stocks
		Both c and d

Under the following conditions, what is the required rate of return for stocks A?

0 = 0.08	ba,1 = 0.65
1 = 0.06	ba,2 = 1.85
2 = 0.08

		17.65%
		26.70%
		14.1%
		18.45%
		None of the above