1. The foundation of MPT is: Risk, Return and Correlation. Please explain this.
2. Explain the Capital Market Line (CML) & Why is it so important in Modern Portfolio Theory (MPT).
3. The Federal Reserve is the primary foundation for setting the structure of the Capital Market Line (CML). Please explain how this works.
4. If you ran an independent bank and decided to give consumers auto loans, explain how you would set lending rates? Hint: Each auto would have an estimated life of five years. Explain.
5. Pensions were at great risk following the financial crisis in 2007. Explain why using the CML line from MPT?
6. If you are a conservative investor and are making investment decisions based upon individual stock Beta numbers, what kind of beta numbers would you feel comfortable with? Explain.
7. Explain the Markowitz Theory. Does it apply today?