Assignment 3 - FINA 127 Assignment#3 Instructions Please...

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FINA 127 Assignment #3: Instructions: Please type your responses and upload them via the link in Blackboard no later than 9:00 AM Friday 3/26/10. This assignment consists of quantitative and essay-style questions. Please show any relevant interim steps in order to receive partial credit. Keep your responses to the essay questions “short and sweet and to the point.” Lastly, I am familiar with many of the online information sources and I have access to all of the same sources that you do. In short, please adhere to GW’s Code of Academic Conduct. Although it should not be necessary, if you feel the need to seek an outside source, be sure to document it properly. PLAGIARISM WILL NOT BE TOLERATED! 1. The table below gives the year-end closing prices for MM Inc., an up-and-coming financial consulting firm started by the unheralded “Wizard of Wall Street,” and the normalized values of the Wilshire 5000 index: Year MM Inc. Wilshire 5000 2005 $250 100 2006 $280 104 2007 $268 102 2008 $329 112 You may assume that this data represents the population. Please calculate the following: A) The standard deviation for both MM Inc. and the Wilshire 5000. MM = .1112 Wilshire = .0478
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B) The covariance between MM Inc. and the Wilshire 5000. .00529 C) The beta of MM Inc. .00529/.0022= .11 = 2.4 2. You hold a portfolio consisting of 45% stock A and the rest invested in stock B.
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