Relationship between inflation and interest rates


Problem 1: What is the relationship between inflation and interest rates? How does this relationship affect asset prices? How does the unemployment rate affect interest rates? How do changes in interest rates affect the balance of payments?

Problem 2: What is the difference between systematic and unsystematic risk? How is the beta coefficient used to assess risk? Is it better to maximize return or minimize risk?  Why?

Problem 3: What factors must be taken into consideration when creating an investment portfolio? How must a portfolio's components be weighted? Is it important to calculate the weighted average risk? Why or why not?

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Finance Basics: Relationship between inflation and interest rates
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