Despite the different methods that may be used by investors to evaluate .4 the expected return, you should always adjust your return by inflation. .Assess the extent to which you agree with the statement

1) Please indicate whether the following statements are true or false. In case of a false statement, briefly specify why the statement is false. 1. A real asset is different from a financial asset because a real asset must take a physical form. 2. In the financial market, an investor buys financial securities from dealers at the ask price and sells financial securities to dealers at the bid price. 3. Mankowitz portfolio theory assumes average investors have a utility function as an increasing and concave function of future portfolio return. 4. According to CAPM, all well-diversified portfolios on the capital market line have the same Sharpe ratio. 5. The Markowitz portfolio theory assumes that investors hold homogenous expectations about risk and returns of financial securities.

In portfolio management, risk reduction is achieved by investing in a portfolio in which the securities Question 3 options:1) have a high covariance 2) have a high correlation coefficient 3) have a low coefficient of variation 4) have a lowcovariance 5) are perfectly positively correlated.

Which of the following is TRUE?   High-risk investments always have high returns If you invest in a risky investment, you are guaranteed to have a high return.  On average, an investor will earn high returns on a low-risk investment On average across investments and over time, riskier investments have higher returns.  A high-risk investment will never have a total loss.

1. Suppose stock A has a higher volatility than stock B. According to CAPM, which one is expected to deliver a higher return? A. A B. B C. The information provided is insufficient D. None of above is correct

LO1 Show the reasons why the net present value criterion is the best way to evaluate proposed investments. LO2 Discuss the payback rule and some of its shortcomings.