1. Why the three step top down security analysis approach is used in investment decision process? explain

2. explain stock valuation techniques

3. Explain why most investors prefer to hold a diversified portfolio of securities as opposed to placing all of their wealth in a single asset. 4. In terms of the Markowitz portfolio model, explain how an investor identifies his / her optimal portfolio. What specific information does an investor need to identify optimal portfolio?

5. How many portfolios are on an efficient frontier? How is an investor's risk aversion indicated in an indifference curve? (1.pt.) 6. Describe the key assumptions underlying CAPM.

7. Many of underlying assumptions of the CAPM are violated in some degree in "real world". Does that fact invalidate model's calculations? Explain.

8. If the risk-free rate of return is 6% and the return on the market portfolio is 10%, what is the expected return on an asset having a Beta of 1,4, according to the CAPM?

9. Given the following information: Expected return for stock A = 18% Expected return for stock B = 25% Standartd deviation of stock A = 12% Standard deviation of stock B = 20% Correlation coefficient = 1,0. Choose the investment below that represents the minimum risk portfolio: Investment Analysis and Portfolio Management a) 100% invest in stock A; b) 100% invest in stock B; c) 50% in stock A and 50% in stock B; d) 20% invest in stock A and 80% in stock B e) 60% invest in stock A and 40% in stock B.

10. The following investment portfolios are evaluated by investor: Portfolio Expected rate of Standard return, % deviation A 12 15 B 10 8 C 10 9 Using Markowitz portfolio theory explain the choise for investor between portfolios A,B and C. (2.pts.)