CAPM

Question 1

What CAPM could help ?

Answer 1

Could explain and predict risk and return on portfolios and individual assets

Explain efficient pricing of portfolio and individual asset

Explain incentives for international investment

Explain key types of risk

Question 2

Define systematic risk

Answer 2

Risk that is caused by macro- economics factors

Influence all return to varying degrees

Fiscal and monetary changes , global warming

Cannot be diversified away

Question 3

Define unsystematic risk

Answer 3

Due to unique factors - example - labour regulations , consumer tastes and CAN BE DIVERSIFIED AWAY

Question 4

Please explain the declining total risk graph

Answer 4

Desenha o gráfico que mostra
Systematic risk
Total risk
Unique risk slide 18

Question 5

Show how international portfolio reduce risk

Answer 5

Fazer o gráfico e mostrar domestic portfolio e well diversified international portfolio

Question 6

How to graph a cml graft

Answer 6

Ver slide 30

Question 7

How to calculate cml

Answer 7

E(r) =Rf+(risk premium)/a.d ) multiple by a.d

Question 8

How to graph clm and market risk premium ?

Answer 8

Ver slide 33