1. The nominal rate of interest a.Is negatively related to inflation b.Is positively related to demand from business c.Is positively related to supply from business d.Does not effect levels of return

2. The expected return on an asset a.Is related to state probabilities and returns in those states b.Is below the actual return more than half of the time c.Is negatively related to the variance of the asset d.Has no relationship with risk

3. If security returns have a normal distribution all of the following EXCEPT: a.The standard deviation is a good measure of risk b.Portfolio returns are normal as well c.Forecasts can be made using only the mean and standard deviation d.The standard deviation is not a complete measure of risk

4. The capital allocation line a.Varies depending on risk aversion b.Shows the investment opportunity set c.Divides investors into two class types d.Does not identify the risk-free rate

5. Utility indifference curves a.Keep the level of utility constant b.Show how indifferent an investor is to risk c.Have increasingly higher values as you travel south west on a risk-return chart d.Do not depend upon risk aversion