Solution_Final_spring08 - Points breakdown Question 1:...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Points breakdown Question 1: 10+(5) Question 2: 5+5+5+5+(5) Question 3: 10+10+5 Question 4: 10+5+5+5 Question 5: 10+10
Background image of page 1

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

View Full DocumentRight Arrow Icon
Question 1 a) The first blank is solved from 950 = 1000 1 + ? <=> ? = 0.0526 = 5.26% The second blank is solved from 981.79 = ? 1.065 + ? 1.065 ± 2 + 1,000 1.065 ± 2 <=> ? = 55 = 5.5% The third blank is solved from ? = 80 1.075 + 80 1.075 ± 2 + 1,080 1.075 ± 3 = 1,1013.01 b) The solution to this problem comes from the equation ? = 80 1.075 ± 1 4 + 80 1.075 ± 5 4 + 80 1.075 ± 9 4 = 1,069.47
Background image of page 2
Question 2 a) Expected return is 11% and standard deviation 6% b) Return of T bills is 5% (1/20), return on stocks is -3.3% (-1/30) and overall return is 0% (0/50) c) The expected return in December 31 is 20 44 5% + 24 44 15% = 10.45% The standard deviation is 5.45% d) You need to have again 60% of the value in stocks and 40% in Tbills. This means to have 17.6 million in Tbills and 26.4 in stocks. So, he needs to buy 2.4million in stocks and sell the same amount in Tbills
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/30/2011 for the course FIN 5514 taught by Professor Jaffe during the Three '11 term at University of New South Wales.

Page1 / 6

Solution_Final_spring08 - Points breakdown Question 1:...

This preview shows document pages 1 - 4. Sign up to view the full document.

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