1. Portfolio theory defines risky investments in 2 ways expected returns and variance ( Standard deviation) of expected returns. What assumptions need to be made about investors and the expected investment returns in this 2 factor approach and state if they are justified in real life.

2. What can be said about the portfolio that is represented by any point along the efficient frontier of risky investment portfolios?

3. What is meant by two fund separation? 4. The capital asset pricing model tells us that a security with a beta of 2 will be expected to yield a return twice that of a security whose beta is 1. Is this statement true?