1.Compare diversifiable and nondiversifiable risk. Which do you think is more important to financial managers in business firms?
2.How do risk-averse investors compensate for risk when they take on investment projects?
3.Given that risk-averse investors demand more return for taking on more risk when they invest, how much more return is appropriate for, say, a share of common stock, than is appropriate for a Treasury bill?
4.Discuss risk from the perspective of the Capital Asset Pricing Model (CAPM).
5.What is the time value of money?