Problem Set II
November 14, 2016
1. X1 , . . . , Xn [L , U ] .
[1] L = 0 , U .
1 = k1 X1
2 = k2 X
3 = k3 max cfw_X1 , X2 , . . . , Xn
k1 , k2 , k3 ?
[2] [1] (efficient) ?
[3] U L . L U
.
2. X1 , X
Answers to PS#5
1. c
2. e
3. d
4. d
5. c
6. b
7. b
8. e
9. c
10.
Q5.
a. Subscript OP refers to the original portfolio, ABC to the new stock, and NP to the new portfolio.
i.
E(rNP) = wOP E(rOP ) + wABC
Answers to PS#6
1. b
2. a
3. b
4. c
5. a
6. a
7. a
8. e
9. b
10.
5-12. a.
E(rP) = (0.3 6%) + (0.7 15%) = 12.30% per year
P = 0.7 25% = 17.5% per year
b.
Investment
c.
Security
Proportions
T-Bills
Stoc
Answers to PS #1
1. e
2. d
3. b
4. b
5. e
6. b
7. a
8. c
9. b
10. c
11. Percentage Margin (PM)
= [Market Value of Securities - Loan] / Market Value
a. PM = (100 x $40 - 2,000) / 100 x $40 = 50%
b. PM
Answers to PS #4
1. a
2. a
11. c
3. c
12. a
4. c
13. b
5. e
6. e
7. b
8. c
9. c
10. c
14. A&C is dominated by B&C.
15.
a. E(rp) = (0.3)(10) + (0.7)(20) = 17%
Var(rp) = (0.3)2(20)2 + (0.7)2(30)2 + 2x(0
Answers to PS #3
1. b
2. a
3. c
4. d
5. a
6. d
7. c
8. c
9.
a. Index0 = (90+50+100)/3 = 80; Index1 = (95+45+110)/3 = 83.33
Rate of Return = (83.88-80)/80 = 4.16%
b. It must be adjusted downward.
(95+4
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(Due date: 7-June)
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(Due date: 30-May)
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(Due date: 21-March)
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(Due date: 4-April)
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(Due date: 2-May)
DeGroot Exercises
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