Short Essays (one paragraph of at least five sentences)
1. Explain the slope of the Security market Line (SML) and what type of data you need to estimate it. What occurrences in the economy can affect the slope of the SML?
2. What does it mean to be risk-averse? Does everyone have the same level of risk-aversion? Explain.
3. Define diversification and what is the important measurement of risk when a portfolio is diversified.