Midterm - Financial Economics V 3025 Fall 2009 Rajiv Sethi...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Financial Economics V 3025 Fall 2009 Rajiv Sethi 5B Lehman Phone: 854 5140 rs328@columbia.edu Midterm Exam 1. An investor with $7000 in her account decides to sell short 200 shares of an asset that is currently priced at $40 per share. What does her balance sheet look like immediately after the trade? If the maintenance margin is 50%, how high can the share price rise before she receives a margin call? 2. An investor has access to two risky assets P and Q with the following statistical properties: E ( r p ) = 10% ; & p = 5% ; E ( r q ) = 20% ; & q = 20% : She can combine either of these assets with bills that pay a risk-free rate of 5%. State whether the following statements are true or false, and give reasons. (a) \If the investor prefers P to all combinations of bills and Q , then she must be risk-averse." (b) \If the investor prefers Q to all combinations of bills and P , then she cannot be risk-averse." (c) \The investors optimal choice cannot be a portfolio that has weight 4 5 in bills and...
View Full Document

Page1 / 2

Midterm - Financial Economics V 3025 Fall 2009 Rajiv Sethi...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online