1) Arbitrage pricing theory relies on weaker assumptions than the capital asset pricing model

1) Arbitrage pricing theory relies on weaker assumptions than the capital asset pricing model.

A. True

B. False

2) Which of the following is NOT a major assumption of arbitrage pricing theory?

A. There are many assets, so asset-specific risk may be eliminated

B. Asset returns may be represented by a factor model

C. Assets are priced such that there are no arbitrage opportunities

D. Asset returns are normally distributed

3) Which of the following is NOT a major type a factor model used in quantitative financial modeling?

A. Fundamental factor models

B. Macroeconomic factor models

C. Statistical factor models

D. Political factor models

4) In which type of factor model are the factors formed from attributes of stocks or companies?

A. Statistical factor model

B. Fundamental factor model

C. Microeconomic factor model

D. Macroeconomic factor model

5) Which of the following is NOT a fundamental factor?

A. Price-to-earnings ratio

B. Quarterly GDP growth

C. Book-value-to-price

D. Financial leverage

6) The denominator of the information ratio is the active risk.

A. True

B. False