Question: Problem 2: True/False (explain IN FULL AND PRECISELY your reasoning): a) The CAPM predicts that a can be zero or positive, but it should never

Problem 2: True/False (explain IN FULL AND PRECISELY your reasoning): a) The CAPM predicts that a can be zero or positive, but it should never be negative, otherwise the SML is not well defined; b) According to Arbitrage Pricing Theory, there cannot be arbitrage if we can construct tracking portfolios with the same loadings of the original securities present in the market; c) Arbitrage Pricing Theory does not make assumption about investors' preferences and endowments; d) No arbitrage implies that we cannot make profits in the market

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