Exhibit 7-7 USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) (1) Capital

Multiple Choice

Exhibit 7-7
USE THE FOLLOWING INFORMATION FOR THE NEXT QUESTION(S) (1) Capital markets are perfectly competitive.
(2) Quadratic utility function.
(3) Investors prefer more wealth to less wealth with certainty.
(4) Normally distributed security returns.
(5) Representation as a K factor model.
(6) A market portfolio that is mean-variance efficient.
-Refer to Exhibit 7-7 In the list above which are assumptions of the Arbitrage Pricing Model?

A) 1 and 4
B) 1, 2, and 3
C) 1, 3, and 5
D) 2, 3, 4, and 6
E) All six are assumptions