Answer the Following Statements Precisely.

I. Investors are normally interested in equity securities rather investing in fixed-income securities because of having higher long-run expected return. Justify your answer along with the market based criteria of selection and assessment of risk related to both type of securities.

II. Why do investors pay attention to bond ratings and demand a higher interest rate for bonds with low ratings?

III. How Diversification helps in reducing risk and allocating resources or capital to a mix of different investments.

IV. Write down major capital market investments in terms of equity and fixed income securities.

V. Considering the Markowitz portfolio theory, define the significance of effective frontier in portfolio risk and return.

VI. Define Capital Asset Pricing Model and Capital Allocation Line