1.

Which statement is true regarding the market portfolio under the CAPM?

Group of answer choices

It has the lowest variance among all available risky combinations.

It includes all publicly-traded financial assets.

Some investors with low levels of risk-aversion does not hold the market portfolio.

It does not necessarily lie on the efficient frontier.

2.

Assume that the annual average excess return of S&P 500 is 7.9%, and the standard deviation is 23.2%. What is a reasonable estimate of the average market price of

risk in the U.S.?

3.

The risk-free rate is 7%. The expected market rate of return is 15%. If the expected return of a stock with a beta of 1.3 is 12%, the stock is

Group of answer choices

overpriced because it has negative alpha

underpriced because it has negative alpha

overpriced because it has positive alpha

underpriced because it has positive alpha