1. If an asset lies above the security market line, is it overpriced or underpriced? Explain why.
2. A stock has a beta equal to 1.0. Is the standard deviation of the stock equal to the standard deviation of the market? Explain your answer.
3. If stock prices move unpredictably, does this mean that investing in stocks is just gambling? Why or why not?
4. Explain why the efficient markets hypothesis implies that a well-run company is not necessarily a good investment?