134aF09Practice

134aF09Practice - 134aF09 Note: For Babar, check out the...

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134aF09 Note: For Babar, check out the more detailed problem and solution in RWJ 17.13, Neon Corporation. We will cover these concepts in the next few weeks. Q1. On January 1, A.B. University had an endowment worth $100M. Of this amount, $25M was invested in Treasury Bills and $75M in a risky Portfolio “A”. By the following Dec. 31, A.B.U. had earned $2M in interest and had received dividends of $3M. Over the year, no portfolio changes were undertaken. Although on Dec. 31, A.B.U.’s portfolio held the same number of shares in “A”, the market value of these shares had declined to $60M because of a general decline in stock prices. The managers of the portfolio expect:     (a) What is the expected annual rate of return on A.B.U.’s portfolio on January 1, and what is its standard deviation? (b) What was the actual rate of return earned over the year? (c) Assuming no change in the estimated   and   what rate of return would be expected of the portfolio held on December 31? (d) If A.B.U. wished to modify the composition of it’s December 31 portfolio so that
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This note was uploaded on 01/20/2010 for the course ECON econ134 taught by Professor M. during the Fall '09 term at UCSB.

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134aF09Practice - 134aF09 Note: For Babar, check out the...

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