How would you describe the investment climate at this point in time?
Before the vote on June 23 in the UK in favor of abandoning the European Union, the
economic data and financial market developments they indicated that the world
5. Based on current dividend yields and expected capital gains, the expected rates of return on portfolios A and
The beta of A is 0.8 while that of is 1.5. The T-bill rate is currently 6%, while the expected rate of return of the S
The standard deviation
M7 - Written Assignment
1. The finance committee of endowment has decided to shift part of its investment
in an index fund to one of two professionally managed portfolios. Upon
examination of past performance, a committee member pro
15. The Closed Fund is a closed-end investment company with a portfolio currently worth $200 million. It has liab
A) What is the NAV of the fund?
B) If the fund sells for $36 per share, what is its premium or discount as a percent of NAV?
a. Stock purchased for:300x$40 =
She has (1200-4000) equity =
b. If the price falls to $30 per share, the value of the stock falls to ($30x300)
The interest to be paid at the end of the year would be (
The taxable bonds after tax have a higher after-tax yield than the municipal bonds in the 0-10% braket, they pay
The Fama-French market factor (Mkt) is better diversified than the SP The
However, the additional stocks in Mkt are relatively small, and hence the
4. Turn back to figure 15.1, which lists the prices of various IBM options. Use the data in the figure to calculate the payoff an
the profits for investments in each of the following July expiration options, assuming that the stock price on the expiration
What is a derivative?
For us to understand a derivative is a security with a price that is dependent upon or
derived from one or more underlying assets. The derivative itself is a contract between
two or more parties based upon the asset or assets and the
The efficient market hypothesis is an investment theory that stated that it is not possible
for an investor to outperform the market because all available information is already
built into all stock prices and it is impossibl
Chapter 02 - Asset Classes and Financial Instruments
ASSET CLASSES AND FINANCIAL INSTRUMENTS
One of the early investment decisions that must be made in building a portfolio is the asset allocation
decision. This chapter introd
Why are several countries using the negative interest rates?
Negative interest rate refers to the case when cash deposits incur a charge for storage
at a bank, rather than receiving interest income. For Example; imagine a bank that pays
4. A coupon bond paying semianual interest is reported as having an ask price of 117% of its $1
If the last interest payment was made one month ago and the coupon rate is 6%, what is the invo
Days sinde last Interest Paymen
17. Here four industries and four forecast for the macroeconomy. Choose the industry that you would expect
to perform best in each scenario.
Industries: Housing contruction, Health care, Gold mining, Steel production.
Deep recession: Falling inflation, fa
12. A municipal bond carries a coupon of 6 3/4%, and is trading at par.
What would be the equivalent taxable yield of this bond to a taxpayer in a 35% tax bracket?
Rate on Municipal Bond
5. Suppose your expectations regarding the stock market are as follows:
State of the Economy
Use eqations 5.6-5.8 to compute the mean
and standard deviation of
4. what must be the Beta of a portfolio with E(rp)= 20%, if rf = 5% and E(rm)= 15%?
Free rate of return
Expected Market Return
Expected Return of the Portfolio
5. The market price of a security is $40. Its expected rate of return is 13
Standard deviation =
Beta of stock =
Residual standar deviation =
a. With both increases variance remains the same.
The variance of stock A with bet of 1.65 is 0.1989