Read the following book: A Randon Walk Guide To Investing by Burton G. Malkiel, W. W. Norton & Company, 2003. This book can be purchased on Amazon.com. You can also use the current edition of the longer book, A Random Walk Down Wall Street by Malkiel, Norton, if you wish. Using one of the books as a guide, answer the following questions in the book report:
1. (a) Briefly discuss the risk-return tradeoff. Why is it important to an investor? Is the holding period (how long you expect to invest) an important factor for risk and return?
(b) What is the equity risk premium and why is it important?
2. Why does Malkiel favor index funds? Explain the types of index funds he favors.
3. Explain asset allocation. Why is it so important?
4. Using Malkiel as a guide, develop a 401(k) investment plan for your retirement. Carefully justify your investment decisions.
5. What are some of the tricks and pitfalls an investor should avoid? Explain.
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