1. CAPM: Describe the Capital Asset Pricing Model (CAPM) and what it tells us.
2. The Security market line: If the expected return on the market is 10 percent and the risk-free rate is 4 percent, what is the expected return for a stock with a beta equal to 1.5? What is the market risk premium?
3. Diversification: Describe how investing in more than one asset can reduce risk through diversification.
4. Systematic risk: Define systematic risk.