A. Risk-free assets. Government bonds are considered to be 'risk-free' assets. Why, then, do they give a return? Are they truly completely free of risk?
B. On January 27, 2010, Steve Jobs took the stage to announce, as expected, a new addition to the Apple's (AAPL) product line. The iPad, a tablet computer, received good reviews but the stock price fell from a close of $205.94 on January 26th to $192.06 by the weekend. In the same period, the Nasdaq index went from 2203.73 to 2147.35. Why would the price of AAPL fall just when the company announces an exciting new product? Comment on what part of the move in AAPL's price was systematic and what part was intrinsic. Assume that AAPL has a beta of 1.28 versus the Nasdaq index.