1. Describe the Capital Asset Pricing Model (CAPM) and the ArbitragePricing Theory (APT) including its assumptions,features andempirical applications. How does the Arbitrage Pricing Theory (APT)alleviate the problems that are raised by financial economists regarding the CAPM?
2. Critically discuss the relationship between capital structure andfinancial risk as well as assess the major firm-specific factors thatmay be responsible for capital structure.
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