1. How do you calculate the present value of a future revenue stream ? How would you choose an appropriate discount rate ?
2. Draw an appropriate graphic and briefly explain the Fisher separation theorem. What is "r" ?
3. Briefly define the "certainty equivalent of risky decision and demonstrate using a graphic why a risk averse investor will prefer the certainty equivalent to the lottery itself.
4. Briefly explain the critical difference (s) between the Markowitz mean-variance model and the Tobin-Sharpe CML.