Chapter 024 Risk Management
True / False Questions
1. A survey of the world's 500 largest companies found that almost all the companies use
derivatives in some way to manage their risk.
TRUE
AACSB: Communication Abilities
Bloom's: Knowledge
Difficulty: Ea

FIN 5309 - Estimation Methods - Part I
Regression Analysis Homework
Shital Sharma
Clark University
shsharma@clarku.edu.
Fall 2015
The Beta of a Stock :
A fundamental idea of modern nance is that an investor needs a nancial incentive to take a
risk. Said d

FIN 5401: Investments
Problem Set 4
1. Which of the following most appears to contradict the proposition that the stock market is
weakly efficient? Explain.
a. Over 25% of mutual funds outperform the market on average.
b. Insiders earn abnormal trading pr

FIN 5309 - Prerequisites
Homework Exercises
Shital Sharma
Clark University
shsharma<at>clarku<dot>edu
Fall 2015
1. Using the random variables X and Y from Table 1, consider two new random variables
W = 3 + 6X and V = 20 7Y . Compute
a) E(W ) and E(V );
b)

FIN 5401: Investments
Problem Set 1
1. You estimate the index regression for excess returns of stock A, and you get the
following results:
RA =.01+.80RM+A
M = 0.20, A = .10 (A is the residual standard deviation).
What is the volatility of the return for s

FIN 5401: Investments
Problem Set 2
1. Assume that all stock returns have the market index as a common factor, and that all stocks in
the economy have a beta of 1 on the market index. The firm-specific components of stock returns
have a standard deviation

FIN 5401 Problem Set 3
1.
Suppose there are only two independent factors (F1 and F2) in an economy. Risk
free rate is 6% and all stocks have independent firm specific components with a
standard deviation of 45%. The following portfolios are well-diversifi