New Chapter Twelve
Bond Pricing and Selection
ANSWERS TO QUESTIONS
1. No. As the cash flows are uncertain, you cannot calculate a precise yield to maturity.
2. If the two securities have the same coupon, the same degree of default risk, and the
same remai

Lab Exercise: Markowitz 3 Asset Portfolio Efficient Frontier
Team: The god of Stock
Students are encouraged to work in teams. A different team member should gather the data for steps 3-5.
Weiheng
This exercise is designed to illustrate the creation of Eff

Chapter Three
Setting Portfolio Objectives
ANSWERS TO PROBLEMS
1. The portfolio must generate $50,000 every September 1. All four bonds in Table 3-6
pay interest on September 1, so any or all four of them can be used. One simple
solution would be to buy 5

Answers for all of the problems are on this sheet. If they are not all visible, scroll right and/or down.
problem 1
risk free rate:
0.03
problem 2
year
A
B
C
equally weighted portfolio
2003
0.05
0.04
0.06
0.05
2004
0
0.01
-0.01
0
2005
-0.05
-0.04
-0.1
-0.

Chapter Three
Setting Portfolio Objectives
ANSWERS TO QUESTIONS
1. The income objective generates a reasonably consistent level of income from the
portfolio. Higher levels of income can be achieved by investing in higher risk
securities. The growth of inc

Chapter Six
Why Diversification is a Good Idea
ANSWERS TO PROBLEMS
1.
~
~
~
a. E ( Rp ) xA E ( RA ) xB E ( RB )
= .5(.12) + .5(.13) = .125 = 12.5%
p xA A xB B
b.
= .5(1.10) + .5(1.20) = 1.15
2.
A
~
cov( A, M )
2
M
~
2
cov( A, M ) A M
= 1.10 x .0002 = 2.

Bond Portfolio Analysis Spreadsheet (Version 3.04)
Current Date:
Day Count Method:
= Update with current data
= Contains calc
3/19/2016
30/360 (Default)
General Bond Information
Purchase Information
Cpn
3.600
2
11-18 0.00
Aug-03
94.27
2
$100
$1,985
$72 3.

Finance Interview Questions
Topic: Personal and Behavioral Related
1. Tell me about a time you displayed teamwork.
2. Tell me about a time you displayed initiative.
3. Tell me about a time you displayed good time management skills.
4. Tell me about a time

gold
national debt in billions of US dollars
HPR (r
HPY
HPR (r
gold
HPY (return) relative) logreturn
debt
(return) relative) logreturn
2006
603.46
8,507
B B
A A
A A 2
2007
695.39 0.15233818 1.152338 0.141793 -0.0428458 0.0018358
9,008 0.058855 1.058855 0

ANSWERS TO PROBLEMS
1. Five year:
FV = $1,552.97
Interest = $552.97
4.5 year:
FV = $1,518.40
interest = $34.57
2. Assume semi annual interest: P0 = $941.50
3. a. D = 5.44 years
b. D = 5.41 years
4. N = 8
P0 = 500 FV = 1000
a. Using the rule of 72, the val

From the mid-term: These were originally designed for 1 page answers. On the final, each essay
should be about 2 pages in length so I reserve the right to modify or combine these questions to
better fit the 2 page format.
1. Carefully explain why dividend

1. SHa= -.087
SHb = .0433
SHc = .1079
2. The mean is 3.27% with a standard deviation of .0613. The Sharpe measure is then
SHp = .0440
Return
C
Portfolio
B
A
Risk
3. A: .0250
B: .0310
C: .0358
Portfolio: .0308
Ranking by geometric mean:
C (best)
B
Portfoli

Chapter Two
Valuation, Risk, Return, and Uncertainty
ANSWERS TO QUESTIONS
11.
ROA, in general. ROE may be appropriate in situations where shares are bought
on margin. The important thing is to ensure that comparisons are valid. Leverage
adds to risk, and

Important information for the Final Exam
The final exam will consist of 40 multiple choice questions, about 15 math, 15
conceptual, and 10 definitions. Each multiple choice questions will be worth 1
mark and the 2, 2-page essays will be worth 20 marks eac

Chapter Ten
Equity Valuation Tools
ANSWERS TO PROBLEMS
4. P = $4.66
7. g = 11.48%
8. Relative to treasury bills, this is an equity risk premium of 7.64%.
[Type text]

Chapter Nine
Picking the Equity Players
Chapter Nine
Picking the Equity Players
ANSWERS TO PROBLEMS
4. Use geometric average.
5. Assume the dividend is paid annually
Calculate g:
If originally you owned 1 share, now you have 4. Current dividends are
then

Chapter Three
Setting Portfolio Objectives
ANSWERS TO PROBLEMS
1. All four bonds in Table 3-6 pay interest on September 1, so any or all four of them
can be used. One simple solution would be to buy 500 of the JKL bonds. They have
a 10% coupon, meaning th

Chapter Five
The Mathematics of Diversification
ANSWERS TO PROBLEMS
1. 1,444,150
2. 48.2%
xb = 51.8%
3. 1.025
4. 0.263.
8. 0.4197
~
2
p = 0.000571
~
2
p = 0.000553
10. E ( R p ) 0.007863 = .7863%
11. E ( R p ) 0.004125 = .4125%
Assuming that short sales

Chapter Seven
International Investment and Diversification
ANSWERS TO PROBLEMS
1. $1.00 = G1.4456 => $0.6918/G Spot
US T bill = 8.68%
60 day forward rate = $0.7100/G
Forward premium or discount =
=
forward rate - spot rate 12
x x100
spot rate
N
$0.7100 $0

Question 10.
Step 1: Using the data in cells B13 to G21 on the MIN VAR PORT tab you can calculate the expected
return, variance and standard deviation of each security. To be consistent with the output from Steps 2 &
3, use the population versions of vari