 |  Fundamentals of Corporate Finance, 4/e Stephen A. Ross,
Massachusetts Institute of Technology
Randolph W. Westerfield,
University of Southern California
Bradford D. Jordan,
University of Kentucky
Gordon S. Roberts,
York University
Return, Risk, and the Security Market Line
Learning ObjectivesAfter studying this chapter in the textbook, you should be able to:
| Compute the expected return and variance/standard deviation for a single asset. |
| | | | Compute the expected return and variance/standard deviation for a portfolio of two assets. |
| | | | Explain the influence of the correlation between the returns for two assets on the risk of a portfolio and ultimately on the benefits of diversification. |
| | | | Define the term efficient frontier and explain how it relates to the feasible set of portfolios. |
| | | | Differentiate between systematic and unsystematic risk. |
| | | | Distinguish between standard deviation and beta as measures of risk. |
| | | | Compute the beta of a portfolio. |
| | | | Clearly understand what functional relationship the security market line is attempting to specify. |
| | | | Define and give examples of the reward-to-risk ratio. |
| | | | Compute the expected return for a stock according to the Capital Asset Pricing Model (CAPM). |
| | | | Be able to compare and contrast the CAPM and the Arbitrage Pricing Theory (APT). |
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2002 McGraw-Hill Higher Education