FINB $313-$ Assignment $120$ February $2024$

$1$ Discuss why common stocks must earn a risk premium.

$2$ Describe how an investor may combine a risk$-$free asset and one risky asset in order to obtain

the optimal portfolio for that investor.

$3$ List and describe $3$ of the more important types of mutual funds according to their investment

policy and use.

$(9)$

$4$ Discuss margin buying of common stocks. Include in your discussion the advantages and

disadvantages, the types of margin requirements, how these requirements are met, and who

determines these requirements.

$5$ Suppose that you have $$1$ million and the following $2$ opportunities from which to construct a

portfolio:

a$)$ Risk free asset earning $9\%$ pa$.$

b$)$ Risky asset with expected return of $30\%$ pa and standard deviation of $40\%$