Question: a) What changes would you expect in the standard deviation for a portfolio of between 4 and 10 stocks, between 10 and 20 stocks, and

a) What changes would you expect in the standard deviation for a portfolio of between 4 and 10 stocks, between 10 and 20 stocks, and between 50 and 100 stocks?

b) The capital asset pricing model (CAPM) contends that there is systematic and unsystematic risk for an individual security. Which is the relevant risk variable and why is it relevant? Why is the other risk variable not relevant?

c) How does the SML differ from the CML?

d) What is the benefit of analyzing the market and alternative industries before individual securities?

e) Under what conditions will it be ideal to use one or several of the relative valuation ratios to evaluate a stock?

f) Discuss a scenario where it would be appropriate to use one of the present value of cash flow techniques for the valuation.

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