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Explain how combination of risk free asset with risky portfolio will affect investment decision Describe CAPM, characteristics of CAPM, assumptions behind CAPM and Capital Market Line Define main differences between Capital Market Line and Security Market Line Comment on the main characteristics of borrowing and lending portfolios (for this question you need to draw graph) Explain systematic and non-systematic risk, and comment on which of these two risks can be avoided and how. Explain the main characteristics of beta, comment on the calculation of beta and define agressive and neutral stocks Define expected and required rate of returns for asset and comment on the choise of investment based on these two rates (buy, sell strategies) Explain separation theorem Explain mean, variance, co-variance, correlation of asset returns. Provide formulas. Define the investment decisions based on the correlatio between asset returns (positively correlated vs negatively correlated) Explain minimum-variance and efficient frontiers of risky assets Define the coupon payment, yield to maturity, and bond prices Explain the three types of bonds (premium, discount, par) Describe the stocks that are plotted above or below Security Market Line Based on the graph comment on X, Y, Z and define which stocks are over/under valued and which are correctly priced and explain why.

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17. Comment on the following statement: Assuming assets are not perfectly positively correlated, the
systematic risk of a portfolio decreases as more assets are added.(If the statement is not correct, explain why)

18. Comment on the slope of the Capital Market Line