Solutions to Problem set V
Investment Analysis 70-492
Fall 2013
Problem 1 A 30-year U.S. Treasury bond with a face value of $1,000
pays a coupon of 8% (4% of face value every six months). The semiannually
compounded interest rate is 8% (a six-month discou
Solution to Practice Problems for Midterm
Investment Analysis
1. If the investor invests ! a proportion of his wealth in Stock A and ! b = 1 ! ! a in Stock
B, the portfolio has expected return E ( Rp ) = ! a E ( Ra ) + (1 ! ! a ) E (
Solutions to Midterm Exam
Investment Analysis 70-492
Fall 2013
Problem 1
a. With the weights on the US stock and 1 on the Global bond
fund, the expected return on the portfolio is
E (RP ) = E (RU S ) + (1 )E (RGlobal ).
= 0.75 0.1 + 0.25 0.05
= 8.75%
Its
Solutions to Practice Final
Investment Analysis 70-492
Fall 2013
Problem 1 Fund FT has an expected return of 19% and a variance of
return of 6.25%. The market portfolio, on the other hand, has an expected
return and variance of 10% and 4%, respectively. T
Solutions to Problem set VIII
Investment Analysis 70-492
Fall 2013
Problem 1 Show that M 2 and Sharpe measures of performance evaluation
are directly related in that a portfolio P will have a negative M 2 measure if
and only if its Sharpe ratio is less th
Solutions to Problem set VI
Investment Analysis 70-492
Fall 2014
Problem 1 A six-year government bond with face value $1000 makes annual coupon payments of 5% and offers a yield of 3%. Suppose that one year
later, the bond still yields 3%. What return has
Solutions to Problem set VII
Investment Analysis 70-492
Fall 2014
Problem 1 Consider the purchase of a combination of two European puts
and a European call with the same expiration date. Assume that the call
costs $5, the put costs $6, and the exercise pr
Solutions to Problem set V
Investment Analysis 70-492
Fall 2014
Problem 1 A 30-year U.S. Treasury bond with a face value of $1,000
pays a coupon of 8% (4% of face value every six months). The semiannually
compounded interest rate is 8% (a six-month discou
Solutions to Problem set
Investment Analysis 70-492
Problem 1 This question deals with the optimal portfolio choice for an
investor with mean-variance preferences in a world with two risky securities,
A and B, and a risk free asset, F. Security A offers a
Solutions to Problem set I
Investment Analysis 70-492
Problem 1 Investor X has $200,000 available in period 0 (now) to support
consumption in periods 0 (now) and 1 (next year). He wants to consume
exactly the same amount in each period. The interest rate
Solutions to Problem set I V
Investment Analysis 70-492
Problem 1 A portfolio management organization analyzes 60 stocks and
constructs a mean-variance efficient portfolio using only these 60 securities.
Assume that the risk free rate is known.
a. How man
Suggested Solutions: Homework 2
Investment Analysis
1. The FV of the investment at the end of 5 years is $140.26 [100 (1.07)5 = $140.26]
2. The FV of the investment at the end of t years is [100 (1.07)t ]. This expression shows that the FV
increases faste
Solutions to Problem set V
Investment Analysis 70-492
Fall 2013
Problem 1 A six-year government bond with face value $1000 makes annual coupon payments of 5% and oers a yield of 3%. Suppose that one year
later, the bond still yields 3%. What return has th
Solutions to Problem set VII
Investment Analysis 70-492
Fall 2013
Problem 1 Consider the purchase of a combination of two European puts
and a European call with the same expiration date. Assume that the call
costs $5, the put costs $6, and the exercise pr