BM 410 HW #3
Multiple Choice
1) Which of the following is true about a continuous PDF?
a) The value of the PDF function tells us the exact probability of getting a specific
outcome.
b) The PDF as a fi
BusM 410 HW #19
1. If your objective is to maximize the Sharpe ratio of your portfolio, then tilting
towards value stocks makes sense only if
A) Value portfolios earn higher average returns than the m
BM 410 HW#18
Multiple Choice
1. If your estimate of the PV of cash flows for a given stock is less that the current price,
then you necessarily believe that the stock is
A) Positive alpha
B) Negative
BM 410 HW #16
Free Response
1. Use the following table to answer the following questions.
A) Suppose you create a portfolio with 80% in A and 20% in B. What would have
been the portfolio return for ea
BM 410 HW#17
Multiple Choice
1) Holding all else constant, a higher price implies a _ risk premium.
A) lower
B) higher
C) more accurate
D) none of the above
2) The aggregation assumption of the CAPM (
BM 410 HW#17
Multiple Choice
1) Holding all else constant, a higher price implies a _ risk premium.
A) lower
B) higher
C) more accurate
D) none of the above
2) The aggregation assumption of the CAPM (
BM 410 HW #15
Free Response
1) Assume there are two risky stocks available, stock A and stock B.
Stock A: E[r] = 17%, =0.16
Stock B: E[r] = 25%, =0.26
=0.20
A) Fill in the following table:
wA
(1-wA)
E
BM 410 HW #16
Free Response
1. Use the following table to answer the following questions.
A) Suppose you create a portfolio with 80% in A and 20% in B. What would have
been the portfolio return for ea
A
regression line, a+bX, is interpreted as
E[Y|X], the conditional expectation of Y given
X.
The
slope of a regression line in general can
be estimated as
b=Cov(X,Y)/Var(X).
The
intercept of a regre
BM 410 HW #15
Free Response
1) Assume there are two risky stocks available, stock A and stock B.
Stock A: E[r] = 17%, =0.16
Stock B: E[r] = 25%, =0.26
=0.20
A) Fill in the following table:
wA
(1-wA)
E
BM 410 HW #14
Free Response
1) Assume the following:
x, and e are random variables, each with their own PDFs
Cov(x,e)=0
y=3x+e
Var(x)=10
Var(e)=50
A) According to Stat Rule #3, what is the total
Regression
StatisticsRule#3
If
XandYarerandomvariables
aandbareconstants
Z=aX+bY
Then
Var(Z)=a2Var(x)+b2Var(y)+2abCov(x,y)
Worksforbothparameterscalculatedfroma
PDF,andparametersestimatedfroma
BM 410 HW #14
Free Response
1) Assume the following:
x, and e are random variables, each with their own PDFs
Cov(x,e)=0
y=3x+e
Var(x)=10
Var(e)=50
A) According to Stat Rule #3, what is the total
BM 410: HW 20
1) BKM, chapter 7 # 30 (page 226)
A) Both the CAPM and APT require a mean-variance efficient market
portfolio. This statement is incorrect. The CAPM requires the meanvariance efficient p
BM 410 HW#18
Multiple Choice
1. If your estimate of the PV of cash flows for a given stock is less that the current price,
then you necessarily believe that the stock is
A) Positive alpha
B) Negative
Fin 410
Due Monday Sept 11 in class - bring a hard copy of page 4 to class
HW #1
As part of the class you will participate in a virtual stock trading project. This project will
encompass several of th
Fin 410
Name: Andrew Dalton
HW #5
1. We recently talked about the CAL and the Sharpe ratio. Please describe the CAL and the
Sharpe ratio. As part of your description be sure to provide the following i
Fin 410
Name: Andrew Dalton
1
HW #4
A stock has an expected return of 16% with a standard deviation of 0.20. Assume you
can borrow and lend risk-free at 5%. Assume your portfolio can include this one
Fin 410
Name: Andrew Dalton
HW #7
Due in my office by Wednesday Oct 4th
For this homework assignment you will use your online marketwatch portfolio to (1) invest in
foreign assets, (2) use a price con
Fin 410
Name:
HW #2
Purpose for HW 2: This homework (1) helps you think about how the differences in tax
treatment between municipal and corporate bonds can affect the investment decision, (2)
helps y
Fin 410
Name: Andrew Dalton
HW #3
Purpose for HW 3: This homework (1) provides practice for you to convert rates
that are measured at different time intervals to and from annual intervals and to
conve
Ratio Analysis and
Quantitative Analysis
Ratio Analysis
Pick your favorite accounting ratio.
Compare accounting ratios for two similar firms.
If they are different, think hard about why the two firms
BM410 HW #21
1. As of end of year 2011: YTM 1t 3%, YTM 2 t 3%, E[YTM 1t 1 ] 3%
Face value of all bonds: 1000
All bonds for this problem pay zero coupon.
Strategy 1: Buy 1 year bond, roll over to anoth
BusM 410 HW #19
1. If your objective is to maximize the Sharpe ratio of your portfolio, then tilting
towards value stocks makes sense only if
A) Value portfolios earn higher average returns than the m
BM 410 HW #13
Use the joint PDF below for the return on stock A and an index fund to answer questions 1-8.
2
2
1. Find E[ rA ], E[ rI ], Cov (rI , rA ), A , I
E[rA]=.57*16+.43*(-17)=1.81
E[rI]=.53*6+.