3.  According to  the  capital asset  pricing model:
A.  an  investor who  is  risk averse  should hold at  least some  of the  risk-free  asset
in  his portfolio.
B.  a stock  with high  risk,  measured as  standard  deviation of  returns,  will have
high  expected  returns  in  equilibrium.
C.  all  investors  who take  on risk  will hold the same  risky-asset  portf olio.
4. Beta is  best described as the:
A.  slope of  the  security market line.
B.  correlation of  returns with  those  of  the  market portfolio.
C.  covariance  of  returns with the  market portfolio expressed  in terms  of  the
variance of  market returns.