Problem
1. Explain why investors who diversified their portfalios will determine the price and, consequently, the expected return on an asset.
2. Chee Cheong, a stock market analyst, is able to identify mispriced stocks by comparing the average price for the last 5 days to the average price for the last 30 days. If this is true, what do you know you know about the efficiency of the capital market?
3. Explain why bond prices and interest rates are negatively. What is the role of the coupon rate and term-to-maturity in this relationship?)