BA 4346 CHAPTER 6
PROBLEM SET PAGE # 1
Chapter 6 Problem Set
1. In forming a portfolio of two risky assets, what must be true of the correlation coefficient
between their returns if there are to be gains from diversification? Explain.
2. When adding a ris
BA 4346 CHAPTER 4
PROBLEM SET PAGE # 1
Chapter 4 Problem Set
1. What are the benefits to small investors of investing via mutual funds?
What are the costs?
2. Why can closed-end funds sell at prices that differ from net value while open-end funds do
not?
BA 4346 CHAPTER 3
PROBLEM SET PAGE # 1
Chapter 3 Problem Sets
1. What is the difference between an IPO (initial public offering) and an SEO (seasoned equity
offering)?
2. What are some different components of the effective costs of buying or selling share
BA 4346 CHAPTER 2 PROBLEM
SET PAGE # 1
Chapter 2 Problem Sets
1. What are the key differences between common stock, preferred stock, and corporate bonds?
2. Why do most professionals consider the Willshire 5000 a better index of the performance of
the
bro
HW1
Chapter 2 1 a. The return rate of stock A from t=0 to t=1 is 47.5/45-1= 0.0556 The return rate of stock B from t=0 to t=1 is 22.5/25-1= -0.1 The return rate of stock C from t=0 to t=1 is 110/100-1= 0.1 The rate of return on the price-weighted index: 0
BA 4346 CHAPTER 1
PROBLEMS SETS PAGE # 1
Chapter 1 Problem Set
1. What are the differences between equity and fixed-income securities?
2. What is the difference between a primary asset and a derivative asset?
3. What is the difference between asset alloca
BA 4346 CHAPTER 5
PROBLEM SET PAGE # 1
Chapter 5 Problem Set
1. Suppose youve estimated that the fifth-percentile value at risk of a portfolio is -30%. Now you
wish to
estimate the portfolios first-percentile VaR (the value below which lie 1% of the retur
BA 4346 CHAPTER 7
PROBLEM SET PAGE # 1
Chapter 7 Problem Set
1. Suppose investors believe that the standard deviation of the market-index portfolio has
increased by 50%. What does the CAPM imply about the effect of this change on the required
rate of retu