Answer the questions in question format citing source throughout and at end. Use source provided and any other to validate point.
A portfolio is efficient if, for a given standard deviation, there is no other portfolio with a higher expected return, or for a given expected return, there is no other portfolio with a lower standard deviation. An efficient portfolio maximizes return for a given level of risk, or minimizes risk for a given rate of return.
Discuss the statements/questions below:
Explain marketability risk and marketability premium.
Why is risk an increasing function of time?
Discuss how the standard deviation, a statistical measure of dispersion, is used in investment analysis?
Sources:
Fabozzi, F. J. & Peterson Drake, P. (2009). Finance: Capital Markets, Financial Management, and Investment Management. New Jersey: Wiley. (See Chapters below).
Chapter 8: Asset Valuation: The Theory of Asset Pricings
Chapter 16: Financial Risk Management
Video Links
Bond duration (introduction) (An illustration of bond duration). https://www.youtube.com/watch?v=9HFLGNaEWl8
Common Stock Constant Growth (Discussion of Common Stock along with an example of the Constant Growth Pricing Model). https://www.youtube.com/watch?v=3BTanCsJ67Y
Discount rate basics (This video explains what are the discount rate and the reasons that something worth less to me today if there is a high interest rate). https://www.youtube.com/watch?v=IXjD8eJYL0U&feature=related
Financial Planning: How to Explain Capitalization Rate (Explanation of capitalization rate). https://www.youtube.com/watch?v=TnzStHUy5Z4
Introduction to Present Value (This video introduce to you one of the most important concept, which is the present value concept). https://www.youtube.com/watch?v=ks33lMoxst0
Math in Daily Life: How to Calculate Rate of Return (This video shows how you calculate the rate of return on your investment). https://www.youtube.com/watch?v=ZjfjxXu4QFc
Relationship between bond prices and interest rates (Why bond prices move inversely to changes in interest rate?) https://www.youtube.com/watch?v=kDRqSJIiTqU
Understanding the basic order types for trading stock: https://www.youtube.com/watch?v=O03_3RMWq7U&feature=results_video&playnext=1&list=PL4A0B1C38D832A423
Yield to Maturity (This video provides an example of calculating Yield-to-maturity). https://www.youtube.com/watch?v=I7V5ld0X0Ow
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