• Answer the following questions.
• What is the difference between a limited liability partnership (LLP), a mutual fund, and an ETF (what is an ETF)?What is the performance record of an S&P500 ETF?What are the long-term performance records of equity mutual funds relative to benchmarks, linking your answer to the AUM growth of passive investing?Explain the fee structure and operating expense trends of mutual funds.

• What is the difference between real and nominal rates of interest?Explain the four moments with respect to investing and specifically, to risk-return.How does this link to normality assumptions?What information does each contain?Which of the four risky portfolios outlined at the chapter's close should longer term investors bias their portfolios? Why?What is a risk premium (on equities)?What is risk aversion?What is the difference between arithmetic and geometric average returns?

• What is the Capital Allocation Line (CAL)?How do indifference curves inform positioning along the CAL?What is the utility equation?What is the indifference curve?Explain the risk aversion metric employed in utility modeling?What is the (approximate) range?

• What is the difference between systematic and unsystematic risk?Which one can be diversified away? Which one is priced?What is the efficient frontier?Define and link the Sharpe Ratio, the Efficient Frontier, and the CAL to the focus of portfolio theory.What is the separation property (first noted by Tobin)?Explain.

• Explain the components of the single index model, linking diversifiable and systematic risk to your answer.What is the Security Characteristic Line and what information does it convey?What is the information ratio and what important information does it convey?Is the full covariance efficient frontier or the index model efficient frontier better?