1.Explain what is meant by the efficient frontier?

2.Under Modern Portfolio Theory (MPT), is it possible to construct portfolios that go beyond the efficient frontier? Why?

3.What was the insight with CAPM? What did that insight enable investors to do that they couldn't do under MPT?

4.Under CAPM, if a portfolio has a beta of 1.5, is it expected to outperform the market when it is rising? Why?

5.Explain why, under CAPM, only systematic (ie: undiversifiable) risk matters?

6.What is the expected return of a stock which has a beta of 0.85, when the risk free rate is 1.25% and the expected return of the market is 9.65%?

7.As per above, except the beta of the stock is 1.25 and the risk free rate is 0.75%?

8.What is the expected return of a portfolio which has a beta of 1.15, when the risk free rate is 0.55% and the market risk premium (ERP) is 6.75%?

9.As above, except the beta of the portfolio is 0.95 and the ERP is 7.75%?

10.How much Jensen's alpha did a portfolio manager generate when their portfolio returned 7.88%, the risk free rate was 0.55%, the beta of the portfolio was 1.15 and the ERP was 6.75%?

11.How much Jensen's alpha did a portfolio manager generate when their portfolio returned 7.88%, the risk free rate was 0.65%, the beta of the portfolio was 1.25 and the return of the market was 8.25%?

12.It is often said that the FamaFrench three factor model is a risk model. Explain why this might be the case.

13.Explain why the beta of a portfolio (or stock) doesn't matter under the French three factor model?

14.Explain what is meant by the size effect.

15.Explain what is meant by the value effect.

16.Explain what is meant by the momentum effect

17.Explain what is meant by the capital market line

18.What is the expected return of a small cap value stock which has an exposure to the size effect (2.25%) of 0.57 and an exposure to the value factor (3.55%) of 0.75, when the risk-free rate is 0.75% and the ERP is 8.25%?

19.What is the expected return of a large cap growth stock which has an exposure to the size effect (2.45%) of -0.29 and an exposure to the value (3.35%) of -0.22, when the tree rate is 0.75% and the expected return of the market is 9.25%?

20.Reviewing your answers for questions 18 and 19, which stock has the highest price?

21.A low-price means " what" in regards to risk and expected return?

22.Go tohttp://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

and note for the Fama French three factor model:

Most recent monthly SmB

Most recent monthly HmL

Most recent monthly ERP

23.How much Carhartt's alpha did a portfolio manager generate when their portfolio returned 7.88%, the risk free rate was 0.55%, the beta of the portfolio was 1.15 and the ERP was 6.75%, the exposure to the size effect (2.15%) was 0.35and the exposure to the value (3.55) was 0.25?