asset - provides flow of money/services to its owner  

• capital gain - increase in value of asset
  • unrealized until asset is sold
• capital loss - decrease in value of asset
• risky asset - random monetary flow, could rise or fall
• riskless asset - pays certain monetary flow, such as bonds
  • usually grows slower than risky assets
• return - total monetary flow an asset yields
  • includes either capital gain/loss as fraction of its price (given in percentages)
  • real return - return after taking into account inflation
  • investments should grow faster than inflation, or worthless
  • higher expected return usually means

investment portfolio - determines how much to invest in each asset  

• R = bR1 + (1-b)R2 = R2 + b(R1-R2)