{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Problem set #7 - Problem Set 7 Ec 136 Fall 2009 This...

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

View Full Document Right Arrow Icon
Problem Set 7 Ec 136, Fall 2009 This problem set is due Thursday, November 19, in class. Sorry, no late problem sets are accepted! All students must submit problem sets individu- ally. Please write your name, section time and GSI on the front page of your solution. 1. True or false Are the following statements true or false? Explain your answer in no more than two sentences. a) According to the logic of mean-variance optimization, highly risk-averse investors should hold no risky assets at all, because the positive expected excess return of stocks will not be enough compensation for the associated risk. b) In a CAPM equilibrium, no portfolio has a higher Sharpe-ratio than the market portfolio. c) Suppose that Xing’s portfolio consists of 40% in 90-day Treasuries (riskfree), 20% in growth stocks and 40% in value stocks, while Sung Bin’s portfolio consists of 60% in 90-day Treasuries, 10% in growth stocks and 30% in value stocks. The mutual fund theorem is violated in this example.
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}