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Chapter 5 Portfolios, Efficiency and the Capital Asset Pricing Model

Chapter 5 Portfolios, Efficiency and the Capital Asset Pricing Model. The objectives of this chapter are to enable you to: Understand the process of combining of securities into portfolios Understand measurement of portfolio return and risk

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Chapter 5 Portfolios, Efficiency and the Capital Asset Pricing Model

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  1. Chapter 5 Portfolios, Efficiency and the Capital Asset Pricing Model The objectives of this chapter are to enable you to: Understand the process of combining of securities into portfolios Understand measurement of portfolio return and risk Appreciate the importance of diversification Understand how diversification is related to security returns covariance and portfolio size Consider the impact of internationalization on portfolio risk and efficiency Combine riskless and risky securities to form an efficient portfolio Understand distinctions between market and firm-specific risk Understand the relationship between return and risk Compute beta and apply it to risk-adjusted discount rates for present value analysis

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