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Unformatted text preview: want to make some investment on Bonds A and B above for your car plan. How much money should you invest on each of them, so that the investment can approximately support your plan, and the diﬀerence between the value of the investment and the cost of the car will not be sensitive to the change on the yield? 3. The following table list the cash ﬂows and prices of 3 U.S. treasury securities. Bond A B C Maturity (year) 1 3 3 Coupon rate 5% 10% Face value($) 100 100 100 Price($) 95.24 96.92 110.35 Suppose all the securities pay the coupon (if they pay) annually. Use these data to determine the current spot rate s 1 , s 2 and s 3 . 1 4. Consider three uncorrelated stocks, with variance 2,2,4, and the mean rate of returns 1,2,2, respectively. Suppose shorting is allowed. (a) Determine the mean-variance eﬃcient portfolio in terms of the mean return rate of the portfolio,¯ r . (b) Find the eﬃcient portfolio that achieves the minimum-variance point. 2...
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- Spring '10
- equal monthly installments, System Engineering and Engineering Management SEG3590 Investment Science, Investment Science Mid-Term