If the holder of an asset will receive $1 every year in perpetuity, such an asset will be priced at 1)$....... when the discount rate is 10%. The price of the asset will be 2)$....... if the amount received will grow by 5% (both answers to be rounded to the second decimal point).

When an investor buys a bond from the issuer, the investor will often pay an amount close to but not exactly the face value of the bond, because the yield that is deemed reasonable in the market for the bond do not exactly matches the 3)....... . Accordingly, when the holder of a bond with a face value of $10,000, maturing in 10 years, will receive $100 every 6 months, the holder will have to pay 4)$...... (no 1000 separators and round to the second decimal point) for the bond if the yield expected by the market is 2.06%.

If an asset's average daily price change (return) is 0.04%, and the standard deviation for the price changes is 0.65%, the average annual price change is expected to be 5)......% and the standard deviation is 6).....% (assume that there are 250 trading days in a year and round the answers to the first decimal point). Accordingly, if an investor held that asset on the first trading day of the year, when the price of the asset is $100, the probability that the investor losing more than 7)$..... (round to the second decimal point) on the first trading day of next year is 5%.

The idea that market prices fully reflect available information is called the 8).... hypothesis.

Investors will earn 9).... return above the risk-free rate for taking risks. However, since risks affecting individual assets will cancel out in a 10)

-specialized/diversified/liquidated/concentrated set of assets (portfolio), investors are not rewarded for taking such risks. In other words, investors will only be rewarded for taking risks that remain in a portfolio of all assets (market portfolio), which is called the 11).... . The capital asset pricing model (CAPM) assumes that an asset will be priced according to how sensitive the asset's price is to changes in the value of market portfolio, and in the model, the sensitivity coefficient is called the 12)..... .

For the non-professional investor, there is a strong case for holding a combination of the risk-free asset and the market portfolio. The proportion of the market portfolio should reflect the risk appetite of the investor. If an investor's is prepared to take more risk than the market portfolio, the investor can achieve this through 13).... .