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Unformatted text preview: 1 2 2. Multiperiod nancial model Suppose that you have $100 , 000 to invest. There are 5 possible investment opportunities (for example, bonds, stock, etc.). We refer them as 1 , 2 , 3 , 4 , and 5. The cash ow in the next 3 years are shown in the following table. Investment 0th year 1st year 2nd year 3rd year 11 . 5 1 21 . 5 1 31 1 . 2 41 1 . 9 51 1 . 5 You can get 8% interest rate from similar bonds on the money market. To diversify the risk, the maximum investment in any single investment is at most $75 , 000. How can you get the maximum return at the end of the 3rd year?...
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This note was uploaded on 04/02/2008 for the course IEOR 162 taught by Professor Zhang during the Spring '07 term at University of California, Berkeley.
 Spring '07
 Zhang

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