Compute Jensen's alpha and the Information Ratio to evaluate portfolio performance.

Describe how the optimal portfolio for an investor is the tangency between the efficient frontier and the highest possible indifference curve.

Show why an investor would prefer as low a correlation coefficient as possible for a two-security portfolio.

Explain why the fact that the "new" efficient frontier as defined by the capital market line (CML) dominates the "old" efficient frontier produced by N risky assets alters one's perception of the appropriate portfolio for an investor to hold.

Explain the roles of beta and the coefficient of determination in defining the risk of a particular security as part of the capital asset pricing model (CAPM).

Describe the arbitrage pricing theory (APT) model.

Describe why an understanding of modern portfolio theory (MPT) and its legal implications for a practitioner are important for today's financial planner.

Compute a holding period return, a per-period return, an arithmetic mean return, and a geometric mean return.

Compute an expected rate of return and an effective annual rate of return.

Describe the sources of risk and the most common methods of dealing with each source.