1.The APT model for security returns provides an approach that combines the replication approach of "no-arbitrage" pricing with certain conclusions similar to those reached by "mean-variance" approaches. Select which of the following statements is most correct regarding the APT and explain why:

a.As a no-arbitrage based approach, APT assumes complete markets to replicate

b.Risk free portfolios cannot be replicated in markets that are incomplete

c.The APT model reduces to a CAPM model when a single factor is appropriate

d.In APT, the "law of large numbers" is required to justify a replication approach

e.None of the above are correct