Chapter Outline Expected Returns and Variances ■Portfolios Announcements,Surprises,and Expected Returns Risk:Systematic and Unsystematic Diversification and Portfolio Risk a Systematic Risk and Beta The Security Market Line The SML and the Cost of Capital:A Preview1 Chapter Outline n Expected Returns and Variances n Portfolios n Announcements, Surprises, and Expected Returns n Risk: Systematic and Unsystematic n Diversification and Portfolio Risk n Systematic Risk and Beta n The Security Market Line n The SML and the Cost of Capital: A Preview