Problem 1: Risk & Return and the CAPM.
Based on the following information, calculate the required return based on the CAPM:
Risk Free Rate = 3.5%
Market Return =10%
Beta = 1.08
Problem 2: Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Std Dev. Exp. Return
Company A 10.4 15.2
Company B 14.6 22.9
Problem 3: Risk and Return, Coefficient of Variation
Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship.
Std Dev. Exp. Return
Company A 7.4 13.2
Company B 11.6 18.9
Problem 4: Portfolio Theory Risk.
What is portfolio theory and why is it important to investing behavior? 250 words
Problem 5: Sources of Risk.
Identify sources of risk and contrast them (include examples) and explain why investors should be concerned with them 250 words.