Assignment #5 Solution (Actsc 372) Total marks: 50
Q1. (5 Marks) False. The stock price would have adjusted before the founders death only if investors had perfect forecasting ability. The 12.5 percent increase in the stock price after the founders death
ActSc 372 WINTER 2010
Assignment 5 Due Date: Monday, March 29, 2010 (Beginning of Class)
1. When the 56-year-old founder of Gulf & Western Inc. died of a heart attack, the stock price immediately jumped from $18 per share to $20.25, a 12.5 percent increas
Winter 10 Actsc 372 Assignment 4 Solution 5 Marks for each part. (total 60 marks) 1 a. Let: X1= the proportion of Security 1 in the portfolio and X2= the proportion of Security 2 in the portfolio and note that since the weights must sum to 1.0, X 1= 1 X 2
ActSc 372 WINTER 2010
Assignment 4 Due Date: Wednesday, March 10, 2010 (Beginning of Class)
1. Assume that the returns of individual securities are generated by the following twofactor model: Ri = E (Ri ) + i F1 + i F2 , where Ri is the return for securit
Assignment #3 Solution W10 Actsc 372 1. (a) Here are the additional assumptions for the calculations: TSX Monthly Expected Return 0.29% Variance/Covariance Matrix TSX TSX 0.22% RIM 0.46% 0.10% RY Rogers 0.20% 0.19% MFC (b)
MinVar:
RIM 2.68% RIM 0.46% 3.9
ActSc 372 WINTER 2010
Assignment 3 Due Date: Friday February 26, 2010 (Beginning of Class)
1. Excel Exercise. This question requires a data set that can be downloaded from the course webpage. All Excel program must be uploaded to the course webpage via dr
Solution 1. (a) Average Returns (assume arithmetic average):
5
xsmall
cap
=
i=1
Ri =
0.1851 + + 0.1255 = 17.384% 5
xmarket
0.1202 + + 0.1453 = = 11.5% 5
(b) Variance and Standard deviation. First note that the sample (unbiased) variance estimates for a
ActSc 372 Winter 2010
Assignment 2 Due Date: Friday, February 5, 2010 (Beginning of Class)
1. The returns on small-capitalization stocks and on the S&P/TSX 300 Index of common stocks from 2001 through 2005 are tabulated as follows: Small-Capitalization Ma
ActSc 372 WINTER 2010
Assignment 1 Due Date: January 25, 2010 (in class 12:30pm)
1. The certainty equivalent (CE) of a risk X is dened as u(CE ) = E [u(X )]. Suppose now you are an expected utility maximizer with utility of wealth u(w) = w , w > 0, 0 < <