I have been very disappointed with the money Ive lost on ABC stock over the past year, but I am certain that the price will bounce back in the future. Identify which principle of behavioral nance is most consistent with the investors 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 companys operating leverage and nancial leverage to minimize the adverse eect of the recession on your company? Briey explain. (c) (5 marks) Why do investors prefer positive convexity? Explain. Use a graph of price-yield curves to arm your explanation. (d) (5 marks) Briey discuss how to create a well-diversied 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% 0% Market 18% 24% A 19% 20%