Would an investor who has allocated 100 of their portfolio

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1. Would an investor who has allocated 100% of their portfolio to an S&P500 index fund be a diversified investor? What should they consider for other portfolio investments if they are risk-averse?

2. How would you explain the "Efficient Frontier" to a non-finance person? Use examples.

3. How do you calculate the risk premium on a junk bond. Use an example to illustrate.

4. How do you calculate the risk premium on the required rate of return for a risky (high-beta) stock? Use an example with the CAPM to illustrate.

5. Are brokerage accounts insured? What would happen if your broker went out of business?

6. How can you value a stock, such as IBM? Show the steps and calculations, using IBM as an example.

7. What typically happens to stocks and bonds when the Federal Reserve raises interest rates. Why? Use an example of a stock and of a bond to illustrate.

8. How do you sell a stock short? What are the risks? Show what could happen with an example.

9. What is the difference between long-term capital gains and short-term capital gains? What are the federal tax rates on each? How does this compare to the taxes on dividends and on wages?

10. What is a limit order? Why would you want to use it? Show how it works with an example.

Reference no: EM13388123

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