There are no trick questions on the exam. Name two types of professionals on the buy side. Describe one stock return anomaly. Means computed using the CAPM tell us how much our portfolio should differ from holding the market portfolio. The main benefit of diversification is a decrease in volatility of returns below that of the typical stock in the portfolio.
Most professional managers outperform their benchmarks.
To first approximation, the optimal response to transaction costs is to trade less to avoid the costs. Portfolio insurance is designed to be an optimal way to beat the market.