ECON 1723 Fall 2013 Midterm 1 - Ec1723 Fall 2013 Midterm...

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Business Analytics: Data Analysis & Decision Making
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Chapter 14 / Exercise C.7
Business Analytics: Data Analysis & Decision Making
Albright/Winston
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Ec1723, Fall 2013: Midterm Exam 1Do all four questions. Read the questions carefully before starting to answer.The °rst question is worth 10 points, and each of the other questions is worth20 points for a total of 70 points.You will be graded on the quality of yourexplanations as well as the accuracy of your answers.You may use a calculatorbut no notes or textbook other than the material provided.Use one bluebook for questions 1 and 2, and one for questions 3 and 4.Besure to write your name and your section leader±s name on each bluebook.1.(10 points.)Recently, Verizon announced an agreement to buy 45% of VerizonWireless from Vodafone for $130 billion.Verizon already owns the other 55% of VerizonWireless, which is not a publicly traded company, so the deal will make Verizon the 100%owner of Verizon Wireless.The market capitalization of Verizon (the total value of allVerizon°s shares) is about $135 billion.What is the stub value of Verizon implied by theseprices?Is there an arbitrage opportunity in this situation?Why or why not?1
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Business Analytics: Data Analysis & Decision Making
The document you are viewing contains questions related to this textbook.
Chapter 14 / Exercise C.7
Business Analytics: Data Analysis & Decision Making
Albright/Winston
Expert Verified
2. (20 points.) An investor is deciding how to combine two assets: a safe asset with aninterest rate of 2%, and a risky portfolio that has a risk premium (an expected excess returnover the safe asset) of 8%, and a standard deviation of 20%.The risky portfolio thereforehas a Sharpe ratio of 0.4.All your answers in this question should be quantitative, with the exception of part d).a) Suppose the investor chooses a complete portfolio whose standard deviation is 10%.(i) What is the portfolio weight on the risky asset?(ii) What is the expected return on the complete portfolio?

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