Stat104-Section2-solution

Stat104-Section2-solution - Stat 104, Section 2 Handout...

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

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

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

Unformatted text preview: Stat 104, Section 2 Handout Solutions Benny, Thursday, 4:00pm, SC 309 Introduction Name: Benny Zhu Email: yinanzhu@fas.harvard.edu Office Hours: Thursdays at 8:00pm @ Winthrop D Hall Course Website: my.harvard.edu/k78388 Problem Set #2 is due on Friday, by 4pm. Hand in at lecture or in my box outside of SC- 300 Outline Association between 2 variables Scatterplot Correlation and Covariance Linear combinations of variables ie: Var( ax + by ) = a 2 Var( x ) + b 2 Var( y ) + 2 ab Cov( x,y ) Linear Regression estimating ( b ,b 1 ) Prediction Lurking/Confounding Variables Problems 1. Match the scatterplots with their correlations 1) -.795 B 2) Roughly 0 DE 3) .772 A 4) roughly .5 CF 1 2 2. Here we will analyze a portfolio composed of 40% Treasury Bills (T-Bills) and 60% Stocks. Let r t ,r s ,r p = annual return of T-Bills, stocks, and the composite portfolio, respectively t , s , p = standard deviation of annual returns of T-Bills, stocks, and the composite portfolio r t,s = correlation between annual stock and t-bill returns Historically, ( r t , t ) = ( . 052 ,. 029) , ( r s , s ) = ( . 133 ,. 170) ,r s,t =- . 1 a. What is the coefficient of variation of t-bills and stocks? CV t = t r t = . 029 . 052 = . 558 CV s = s r s = . 17 . 133 = 1 . 28 b. What is the expected return on this investment?...
View Full Document

This note was uploaded on 03/27/2012 for the course STATS 104 taught by Professor Michaelparzen during the Fall '11 term at Harvard.

Page1 / 6

Stat104-Section2-solution - Stat 104, Section 2 Handout...

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