Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 4
1. We use the equation E (ri ) rf 1.51 22
0.25 1.51 22
0.21 2.21 0.22
Solving these equations gives 1 0.1 and 2 0.05
Thus, the expected return-beta relationship is:
E (ri )
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 3
1. Exactly 36 stocks gives a standard deviation of 60/6=10 percent.
2. The portfolio beta is 0.6*1.2+0.4*0.9=1.08.
3. The expected return is the riskfree rate plus beta tim
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 2
1. This is the variance covariance matrix
Canada
US
Germany
Canada
32.81
19.02
18.13
US
19.02
20.00
15.78
Germany
18.13
15.78
41.11
Japan
13.15
9.91
16.03
Australia
26.24
1
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set I
1.(a) The bill yield was 2.825 percent. The yield and price are related via the formula
10000 P 360
y
*
10000
72
With the yield of 0.02825, the solution for the price is $9
Second Midterm Exam
Fall 2010
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 55 minutes
Please write your answers on the page below each question
1. (10 points) Suppose that GE earnings are 2 dollars per share, and the ret
First Midterm Exam
Fall 2010
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 1 Hour
1. (15 points) An asset pays an investor $100 in one year from now and another $100 in two years. The
effective annual interest rate (EAR)
Final Exam
Fall 2012
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 3 hours
Please write your answers on the page below each question
1. (10 points) Sues utility function is w1/2 where w is wealth in dollars. Sue is offere
Final Exam
Fall 2011
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 3 hours
1. The price of a stock today is $50. The risk-free interest rate is zero. There are four possible
scenarios
a. The stock price rises to $52 in si
Final Exam
Fall 2011
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 3 hours
1. The price of a stock today is $50. Assume that in one years time, it will either go up to $55 or
down to $45. The risk-free interest rate is 5
Final Exam
Fall 2014
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 3 hours
Please write your answers on the page below each question
1. (5 points) Assume that the risk-free interest rate is 1% and that gold is costless to
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 4
1. For both firms, the required return is 0.02 (1.4*0.05) 0.09 .
Let PB and g B denote the price and growth of expected dividends for Blob. Then
1
1
k g B 0.09 g B
10
10
1
Problem Set 5: Solutions
1. Duration is 4.60 years.
2. (a) Because short-term rates are expected to rise, and because the risk of capital loss on a short
term security is less than on a long-term security. So long-term securities are cheaper and have
high
Problem Set 5 for Economics 180.367:
Investments and Portfolio Management
Due at the beginning of class on November 23.
Note: Point totals are shown at the beginning of each question. It is important to show your
work.
1. (10 pts) Suppose that the yield o
Problem Set 4 for Economics 180.367:
Investments and Portfolio Management
Due at the beginning of class on November 9.
Note: Point totals are shown at the beginning of each question. It is important to show your work.
1. (10 pts) Suppose that there are tw
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 3
(1a) E
0.0168
0.021
1.2 and S
1.5
0.014
0.014
(1b) First we will find the weights that create a portfolio such that P 0 . The portfolio weights
must sum to one, so we h
Problem Set 3 for Economics 180.367:
Investments and Portfolio Management
Due at the beginning of class on October 19.
Note: Point totals are shown at the beginning of each question. It is important to show
your work.
1. (50 points total) Below is the Var
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 2
1. Assume the annualized net return on 1-month treasury bills (which are riskfree) is 0.0268, or 2.68
percent, then solve for the net monthly percentage return on 1-month t
Solutions to Problem Set 5
1. (a) The two year yield is (1.05*1.07)1/2 1 = 6%
The three year yield is (1.05*1.07 *1.08)1/3 1 = 6.66%
(b) The price of the coupon bond is
6
6
106
+
+
= 98.41
2
1.05 1.06 1.06663
(c) The yield to maturity solves the equation
Problem Set 6: Solutions
1.On 1/1/2007, B pays A 0.5*(0.053-0.0525)*$10 million=$2,500
On 7/1/2007, A pays B 0.5*(0.0525-0.052)*$10 million=$2,500
Now things go downhill for A:
On 1/1/2008, A pays B 0.5*(0.0525-0.03)*$10 million=$112,500
On 7/1/2008, A pa
Problem Set I for Economics 180.367:
Investments and Portfolio Management
Due at the beginning of class on September 28.
Note: Point totals are shown at the beginning of each question. It is important to show
your work.
1. (4 pts) Using simple compounding
Problem Set 6 for Economics 180.367:
Investments and Portfolio Management
Due at the beginning of class on December 7.
Note: Point totals are shown at the beginning of each question. It is important to show
your work.
1. (10 pts) Suppose that two counterp
Economics 180.367: Investments and Portfolio Management
Solutions to Problem Set 2
1. This is the variance covariance matrix
Canada
US
Germany
Canada
32.81
19.02
18.13
US
19.02
20.00
15.78
Germany
18.13
15.78
41.11
Japan
13.15
9.91
16.03
Australia
26.24
1
Final Exam
Fall 2013
Econ 180-367
Closed Book.
Formula Sheet Provided. Calculators OK.
Time Allowed: 3 hours
Please write your answers on the page below each question
Note: All interest rates and coupon rates quoted are per year. For example, a bond with