Exam 3 Fall 2003 - Name Class Time Exam 3 Finance 4030 001...

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Name________________________________ _______ Class Time_______________ Exam 3 11-12-03 Finance 4030 001 & 004 Fall 2003 1. Name and describe the three forms of the Efficient Market Hypothesis. (3) 2. Calculate the price for a bond with a par of $1,000 maturing on 3 years with annual coupons of $60. The effective annual discount rate is 8%. (6) 3. Do we use time-weighted returns or dollar-weighted returns when evaluating the performance of an investment manager and why? (3) 4. Does it make a significant difference if a forward contract is set up with or without a fixed price at expiration and why or why not? (3) 1 of 15 Page 1
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5. Using the data below, calculate the overall % out-performance and the portion attributable to the asset allocation decision and the portion attributable to security selection within each asset class. (6) Total % Excess Return____________ Bogey Portfolio Return = 8.50% Due to Asset Allocation___________ Due to Cash Security Selection____________ Due to Bond Security Selection____________ Due to Stock Security Selection____________ 6. Based on the information below, calculate the Sharpe Ratio and the Information Ratio for the portfolio. (6) Annualized Portfolio Return 9.50% Annualized Benchmark Return 8.25% Annualized σ of α Versus Benchmark 2.50% Annualized σ of Portfolio Returns 6.00% β of Portfolio 0.80 Annualized σ of Market Returns 7.50% Risk-Free Rate 3.50% Cash Bonds Stocks Allocation in Bogey Portfolio 10% 40% 50% Allocation in Your Portfolio 5% 25% 70% Index Return 4% 8% 10% Your Return 4% 10% 14% 2
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Sharpe Ratio________________ Information Ratio_____________ 7. What is put-call parity and how is it achieved in the markets? (2)
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