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1) Let us start with what is the difference between a real and a financial asset?
2) What is the risk-return tradeoff?
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- What does it mean when you have a risk-free guaranteed rate? Give an example as well as the explanation.Why does standalone risk differ from portfolio risk? Explain and give examples! Relates your answer with CAPM!Which one of the following is the slope of the security market line? Market risk premium Risk-free rate Beta coefficient
- Another name for the expected value of an investment would be: Answer a. The mean value b. The upper-end value c. The certain value d. The risk-free valueWhat are the similarities and differences between the CML and SML as models of the risk return trade-off?Which of the following is the correct equation of the capital asset pricing model (CAPM)? (E(Ri) denotes the expected return on a security, Rf denotes the risk-free rate, [E(RM) − Rf] denotes the market risk premium, and βi denotes the amount of systematic risk present in the security.) Multiple choice question. E(Ri) = Rf + [E(RM) – Rf] × βi E(Ri) = Rf – [E(RM) + Rf] × βi E(Ri) = Rf – [E(RM) – Rf] × βi E(Ri) = Rf + [Rf− E(RM)] × βi
