Problem 1: Define the following and give an example:
- Risk
- Return
- Risk Preferences
Problem 2. What are the procedures for assessing and measuring the risk of a single asset? When would you do this?
Problem 3. How do you measure the return and standard deviation for a portfolio? Would you do this, or have your investment house provide it to you?
Problem 4. What is the concept of correlation? How is it used in finance?
Problem 5. Explain in terms of correlation and diversification the risk and return characteristics of a portfolio. Who would need to know this information?