Reading 53. Portfolio Risk and Return: Part II
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Learning Outcome Statements
|Reading 53. Portfolio Risk and Return: Part II|
|1. Capital Market Theory|
a. describe the implications of combining a risk-free asset with a portfolio of risky assets;
b. explain the capital allocation line (CAL) and the capital market line (CML);
|2. Pricing of Risk and Computation of Expected Return|
c. explain systematic and nonsystematic risk, including why an investor should not expect to receive additional return for bearing nonsystematic risk;
d. explain return generating models (including the market model) and their uses;
e. calculate and interpret beta;
|3. The Capital Asset Pricing Model|
f. explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML);
g. calculate and interpret the expected return of an asset using the CAPM;
|4. Applications of the CAPM|
h. describe and demonstrate applications of the CAPM and the SML.