1. Is business risk the same as financial risk and interest rate risk? How about real return, expected return, and profits? Can you show how expected return is calculated?
2. Discuss systematic and unsystematic risk. Can a portfolio be built that reduces total risk by portfolio diversification?
3. If the price of a common stock is the present value of its future expected dividends, what is the price of a stock that is expected to pay $8 a yr. if the relevant interest rate is 5%? 3%?