1. Describe the difference between an asset with a Beta of .76 and an asset with a Beta of 1.38.
2. Define and discuss three errors in information processing (forecasting errors, ovrconfidence,and conservatism) and three behavioral biases that occur within markets (framing, mental accounting, and regret avoidance).
3. A future price is currently 50. At the end of six months it will either be 56 or 45. What is the value of a six month European put option with strike price of 49? How would you hedge this option if you bought it?