Prelim2_2006 - ORIE 473 — Prelim 2 Mon Apr 3 2006...

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Unformatted text preview: ORIE 473 — Prelim 2 Mon, Apr 3, 2006, 11:15–12:05 Professor David Ruppert This exam is closed book. You may use three sheets (six pages) of notes. Time yourself carefully. Do the problems first that you find easiest. You do not need to complete all numerical calculations. For example, an answer in the form (0.1)(157) + (0.9)(123) would be just as acceptable as 126.4. Let Φ be the standard normal cumulative dis- tribution function. You can leave answers in terms of Φ. You may keep this exam. Just turn in your blue book. Indicate on the cover of each blue book you use which problems are contained inside and in what order. You will get two points extra credit if you fol- low this and all other instructions about the exam. The point value of each subquestion is in square brackets, for example, [10]. Problem 3(d) is extra credit. Good luck. 1. Suppose that the risk-free interest rate is 0.05, that the expected return on the market portfo- lio is μ M = 0 . 10, and that the volatility of the...
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