(a) (5 marks) I have been very pleased with the returns I've earned on ABC stock over the past year and I am certain that it will be a superior performer in the future. Identify which principle of behavioral finance is most consistent with the investor's statement? (b) (5 marks) You are the CEO of a large supermarket. You forecast that the economy is sliding into a recession. How can you adjust the company's operating leverage and financial leverage to minimize the adverse effect of the recession on your company? Briefly explain. (c) (5 marks) Why do investors prefer greater convexity? Explain. Use a graph of price-yield curves to affirm your explanation. (d) (5 marks) Briefly discuss how to create a well-diversified portfolio in practice. List your steps. (e) (5 marks) Evaluate if the following situation would be possible under the CAPM assumption. Portfolio Expected Return Risk Risk-free 6% Market 18% 24% 17% 20% 0% (a) (5 marks) I have been very pleased with the returns I've earned on ABC stock over the past year and I am certain that it will be a superior performer in the future. Identify which principle of behavioral finance is most consistent with the investor's statement? (b) (5 marks) You are the CEO of a large supermarket. You forecast that the economy is sliding into a recession. How can you adjust the company's operating leverage and financial leverage to minimize the adverse effect of the recession on your company? Briefly explain. (c) (5 marks) Why do investors prefer greater convexity? Explain. Use a graph of price-yield curves to affirm your explanation. (d) (5 marks) Briefly discuss how to create a well-diversified portfolio in practice. List your steps. (e) (5 marks) Evaluate if the following situation would be possible under the CAPM assumption. Portfolio Expected Return Risk Risk-free 6% Market 18% 24% 17% 20% 0%