Seminar paper from the year 2004 in the subject Business economics - Investment and Finance, grade: 1,0 (A), Leeds Metropolitan University, course: Financial Management, language: English, abstract: IntroductionModern portfolio theory is the philosophical opposite of traditional stock picking.1 It provides a tool with which it is possible to reduce the risks in business and private investments. At the same time it is the basis for the Capital Asset Pricing Model (CAPM).This short assey introduces both the theoretical framework of Modern Portfolio Theory (MPT) and the CAPM which are then applied to Rolls-Royce plc. As this is just an overview the reader must be aware that this outline doesnt go too deep.