What the risk-free rate represents — return on a theoretically riskless investment (Treasury bills)

What is the Capital Asset Pricing Model (CAPM) and how does it calculate the expected return on an investment?

CAPM: Expected return = Risk-free rate + Beta * (Market return - Risk-free rate)

What the yield curve shows — interest rates across different bond maturities

The yield curve illustrates the relationship between bond yields and their maturities

What free cash flow tells you — cash generated after capital expenditures

Free cash flow indicates a company's ability to generate cash after necessary investments

What Modern Portfolio Theory says — diversification reduces risk without reducing expected return

MPT asserts that diversification lowers unsystematic risk while maintaining expected return

What moral hazard causes — people take more risk when they don't bear the full consequences

Moral hazard: Insurance coverage leads to riskier behavior due to reduced personal consequences

What the efficient frontier is — the set of portfolios with maximum return for each risk level

The efficient frontier represents optimal portfolios with highest returns for given risk levels