1. Which of the following regarding the Capital Market Line (CML), is false?
   1. In equilibrium, the CAPM says that the CML represents the best risk-reward combinations available to all investors.
   2. The slope of the CML is the risk premium on the market portfolio divided by its standard deviation.
   3. Although investors will try and achieve higher returns, the forces of competition will move asset prices toward the CML.
   4. The CML applies regardless of market conditions.
2. While the __CML/SML__ shows the rates of return for a specific portfolio, the __CML/SML__ represents the markets risk and return at a given time, and shows the expected returns of individual assets.
3. The hypothetical value of an option if it were expiring immediately is called its ________________________.
4. Which of the following is false about the Security Market Line (SML)?
   1. It is a graphical representation of the Capital Asset Pricing Model (CAPM)
   2. Its slope is the risk premium on the market portfolio
   3. It is the line that connects the risk-free rate of return with the tangency point on the efficient frontier of optimal portfolios
   4. It shows the relationship between the expected rate of return of a security and its systematic/non-diversifiable risk
5. True/False. The Black-Scholes model for option pricing assumes a continuous adjustment of the replicating portfolio over time.