Answer all or dont take

Question 1:

The table provides factor risk loadings and factor risk premia for a two-factor model for a particular portfolio where factor portfolio 1 tracks Inflation and factor portfolio 2, IR, tracks unexpected changes in interest rates. The risk-free rate is 3%. If a trader estimates the expected / average return of the Portfolio XYZ to be 9% and believes that he is correct, what is the arbitrage strategy?

Portfolio XYZ	Factor Loading	Risk Premium
Inflation	-1.0	5%
IR	1.5	7%

		Short XYZ, Long Inflation, Short IR, Borrow Risk-Free
		Short XYZ, Short Inflation, Long IR, Buy Risk-Free
		Long XYZ, Long Inflation, Short IR, Borrow Risk-Free
		Long XYZ, Short Inflation, Long IR, Borrow Risk-Free
		Long XYZ, Long Inflation, Short IR, Buy Risk-Free

Question 2:

The two-factor model on a stock provides a risk premium for exposure to market risk of 8%, a risk premium for exposure to wheat commodity prices of 6%, and a risk-free rate of 3%. The beta for exposure to market risk is 1, and the beta for exposure to commodity prices is 0.75. What is the expected return on the stock?

		21.3%
		18.5%
		15.5%
		9.3%
		None of the above

Question 3:

Which of the following are true? [I] The weak form of the EMH states that all past information, including security price and volume data must be reflected in the current stock price [II] The semi strong form of the EMH states that all publicly and privately available information must be reflected in the current stock price [III] The strong form of the EMH states that all information, including insider information must be reflected in the current stock price

		I only
		II only
		I, II and III only
		I and II only
		I, and III only

Question 4:

Which of the following beliefs would not preclude constructing momentum oscillators with pricing data as a method of portfolio management?

		Stock prices are not consistent with random walks
		The market is strong-form efficient
		The market is semi strong-form efficient
		The market is weak-form efficient
		None of the above

Question 5:

Which of the following is not a method employed by followers of technical analysis?

		Charting
		Momentum oscillators
		Financial statement analysis
		Trading around support and resistance levels
		Bollinger bands