Material for Final Fall 2007 - Finance 748 Fall 2007...

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Finance 748Fall 2007Material for Final ExamQuestion #1:You will be given returns data for four stocks along with their betas, therisk-free rate, and the market risk premium. You will need to use Excel to create acovariance matrix and use that, along with expected returns you will calculate, to find theMean-Variance Efficient Portfolio (MVE). You will then combine the MVE with therisk-free asset to form the Capital Allocation Line (CAL). Once you have this, you willuse an investor’s utility function to determine exactly where on the CAL she will be andhow much money she should invest in each asset to maximize her utility.Question #2:You will be asked several specific questions about market efficiency andbehavioral finance. Your answers will need to include references to our requiredacademic papers, cases and video.Question #3:You will be given the returns for a stock and for the S&P 500 (the market).You will need to do a regression to estimate both the alpha and beta for the stock. Based
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Term
Spring
Professor
Hansen
Tags
Finance, Capital Asset Pricing Model, Valuation, risk free rate, market risk premium, MVE

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