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Extra Credit Assignment 3

# Extra Credit Assignment 3 - mess(Assume no short selling is...

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Extra Credit Assignment #3 EC370 – W09 This assignment is due in class on 3/12. All answer must be typed or copy/pasted directly from Excel. 1) Since August 2007, how many times has the S&P moved by more than 3% in a single day (open to close)? How about between Jan, 1 1990 and August 2007? Briefly explain how to do this. Hint: yahoo finance has historical prices 2) Consider the period given on worksheet #2 of the excel file. What was the best 4 month period to implement the strategy that contributed to the demise of LTCM? Hint: You only need to use some of the series I have given to you. Briefly explain how to do this. 3) Plot the “efficient frontier” generated by combinations of the securities in the excel worksheet. Your graph should be labeled very clearly and not look like a
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Unformatted text preview: mess. (Assume no short selling is allowed) What is the Expected Return and Variance for the minimum variance portfolio? Hint: You will need to use the Solver which works in a similar way to Goal Seek. Additionally, you will need the formulas in the asset valuation lecture and figure out how they change when you have three securities instead of two. 4) In worksheet 4, I list a series of cash flows. Assume a discount rate equal to 4%. What is the most you would pay for these cash flows at the end of Year 1? Year 3? Year 7? If you pay \$4,000 at the beginning of Year 1 (end of Year 0 if you like…), what is the yield to maturity? Copy/paste your output from Excel. The more information you can show (coherently) the better....
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