Material for Final Fall 2007 - Finance 748 Fall 2007 Material for Final Exam Question#1 You will be given returns data for four stocks along with their

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

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Finance 748 Fall 2007 Material for Final Exam Question #1 : You will be given returns data for four stocks along with their betas, the risk-free rate, and the market risk premium. You will need to use Excel to create a covariance matrix and use that, along with expected returns you will calculate, to find the Mean-Variance Efficient Portfolio (MVE). You will then combine the MVE with the risk-free asset to form the Capital Allocation Line (CAL). Once you have this, you will use an investor’s utility function to determine exactly where on the CAL she will be and how much money she should invest in each asset to maximize her utility. Question #2 : You will be asked several specific questions about market efficiency and behavioral finance. Your answers will need to include references to our required academic 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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