a9smcpartb

# a9smcpartb - Autumn 2011 Managerial Finance Prof. Francisco...

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Autumn 2011 Managerial Finance Prof. Francisco Pérez-González Stanford Management Co. Part B. Read and prepare: Stanford Management Co. Part B (in the course reader). Big picture question: What allocation to Japan maximizes the Sharpe ratio of the Stanford Management Co. portfolio? Assignment: 1. What minimum expected return must one assume for Japan (keeping the expected return on Non-Japan fixed at 14 percent) to justify a positive investment in Japan? Assume that the risk free rate at the time of the case was 6 percent. Big picture Hint 1: (Step by step) 1. Set a spreadsheet with Japan and Non-Japan allocations, with allocations to Japan (Non-Japan) starting at 0 (100) percent and increasing to 50 percent in increments of 1 percent. 2. In Excel set the (a) expected return and variance formulas using the formulas from last class (Berk-DeMarzo, Sections 11.2 and 11.3), and (b) the formula for the volatility (squared root of variance). The idea is to get the expected return, variance and volatility for portfolios with different

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## This note was uploaded on 01/08/2012 for the course MS&E 245G taught by Professor Perez-gonzalas during the Fall '11 term at Stanford.

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a9smcpartb - Autumn 2011 Managerial Finance Prof. Francisco...

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