Principle 1: Cash Flow is What Matters

Principle 2: Money has a Time Value

Principle 3: Risk Requires a Reward

Principle 4: Market Prices are Generally Right

Principle 5: Conflicts of Interest Cause Agency Problems

Describe which chapter 1 Principle goes best with Figure 6-7.

Portfolio returns (%) 15 High-beta portfolio characteristic line 10 Low-beta portfolio characteristic line 5 B = 1.5 B = 0.5 = S&P 500 Index returns (%) 5 -15 -10 -5 . 10 15 -5+ -101 -15