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1) A portfolio with a correlation of +1 is not a well-diversified portfolio. What must you as an investor do to structure a portfolio with negative correlation?

2) What macroeconomic variable do you believe has the greatest impact on interest rates? Inflation? Briefly explain

3) Compare and contrast the Capital Asset Pricing Model (CAPM) and Arbitrage Pricing Theory (APT)? Which model is appropriate for calculating a stock's required rate of return? What is the Securities Market Line and which of the above models is it a product of?

4) How would you determine if a public corporation's financial statements are reliable?

5) What is a straddle? Would you use it when buying/writing options? Why?

6) Are the financial markets efficient, and if so, under what form of the Efficient Market Hypothesis model?

7) What is the Bid price for a stock? What is the Ask price for a stock? What is a Stop Loss for a stock?

8) Briefly compare and contrast the primary market and the secondary markets. What types of investors participate in each market? Briefly describe the investment banking process.

Solution Description

1) A portfolio with a correlation of +1 is not a well-diversified portfolio. What must you as an investor do to structure a portfolio with negative correlation?

2) What macroeconomic variable do you believe has the greatest impact on interest rates?