Foundation of Financial Management

Assignment 1: Risk and Return Trade-Off

General Questions:

Respond to the following questions thoroughly, in 150–300 words for each question. Use your textbook as your first and major reference.

1. Why are investors risk-averse? How can investors deal with different degrees of risk?
2. What is the expected return on a portfolio? How can the expected return on a portfolio be manipulated to minimize the risk on that portfolio?
3. What is the beta coefficient for a firm? What does it tell us about the firm? Why do similar firms have different beta coefficients?