Questions from General Investment

Q: What is an efficient portfolio, and what role should such a

What is an efficient portfolio, and what role should such a portfolio play in investing?

Q: What is the capital asset pricing model (CAPM)? What role

What is the capital asset pricing model (CAPM)? What role does beta play in the model? What is the risk premium? How is the security market line (SML) related to the CAPM?

Q: Is the CAPM a predictive model? How can investors use the

Is the CAPM a predictive model? How can investors use the CAPM?

Q: Describe traditional portfolio management. Give three reasons why traditional portfolio managers

Describe traditional portfolio management. Give three reasons why traditional portfolio managers like to invest in well-established companies.

Q: What is modern portfolio theory (MPT)? What is the feasible

What is modern portfolio theory (MPT)? What is the feasible or attainable set of all possible portfolios? How is it derived for a given group of investments?

Q: What is the efficient frontier? How is it related to the

What is the efficient frontier? How is it related to the attainable set of all possible portfolios? How can it be used with an investor’s utility function to find the optimal portfolio?

Q: You sell 200 shares of a stock short for $60 per

You sell 200 shares of a stock short for $60 per share. You want to limit your loss on this transaction to no more than $1,400. What order should you place?

Q: Define and differentiate among the diversifiable, undiversifiable, and total risk

Define and differentiate among the diversifiable, undiversifiable, and total risk of a portfolio. Which risk is relevant in predicting the return that a portfolio may earn? How is it measured?

Q: Define beta. How can you find the beta of a portfolio

Define beta. How can you find the beta of a portfolio when you know the beta for each of the assets included within it?

Q: Explain how you can reconcile the traditional and modern portfolio approaches.

Explain how you can reconcile the traditional and modern portfolio approaches.