Describe how variance and standard deviation are used to measure the variability of individual stocks.

Measure the variability of individual stocks

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  1. Describe      how variance and standard deviation are used to measure the variability of      individual stocks.
  2. Explain      how an investor chooses the best portfolio of stock to hold.
  3. Discuss      how diversification is used to mitigate risk in the portfolio.
  4. Describe      the relationship between risk and expected return (CAPM).
  5. Explain      how the risk-free rate, market risk premium and stock beta are used to      calculate expected returns using the capital asset pricing model (CAPM).
  6. Explain      how cyclicality of revenues and operating leverage help determine beta.
  7. Describe      the dividend discount model (DDM) approach and how is it different than      CAPM.
  8. Understand      how to calculate the weighted average cost of capital to determine the      optimum level of debt and equity to finance an investment.
  9. What      derivatives are and how are they used to manage risk.
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