3 questions - ERP, asset allocation, Monte carlo allocation, regarding, statements

DoubleDip

1. Please remove my doubts regarding market risk premium and equity risk premium once and for all. I still get confused even in level 3 (no hope !! )

Ri = Rf + beta * (Rm - Rf)

I thought (Rm - Rf) = market risk premium
beta * (Rm - Rf) = Equity risk premium

Just saw a sample exam where (Rm - Rf) is referred to as equity risk premium. can that be right?

2. Is "investor risk tolerance is constant" for both Strategic asset allocation and Tactical asset allocation?

I have seen statements where either one of the asset allocations are being discussed and statements appear like "investor risk tolerance is constant"


3. CFAI Vol 5 page 279, Problem 12.

It is a monte carlo var problem. They are asking to calculate 5% annual var.
we are provided with 40 worst returns of 700 outcomes.
we are also provided with expected return and standard deviation.

I thought Monte Carlo method uses the same formula as variance covariance method. However CFAI solves it using similar method as Historical method.

?????

Thanks in advance for help.