A Brief History
of Risk and
Chapter One Outline
The Historical Record
Arithmetic versus Geometric Returns
Risk and Return
Tulipmania and Stock
BBUS 315, Winter 2010
First Name: . ID# .
For the multiple choice questions, circle only one answer that you think is correct. Each of
them is worth three points. For questions 11-15, clearly show your work in the space
BBUS 3150 Winter 2012, Midterm I, Solutions
a. Your portfolio is either the minimum variance portfolio, or it lies on the inefficient part of
the investment opportunity set.
b. Portfolios on Markowitzs efficient frontier have maximum expected return fo
Midterm 2 Solutions
1. Sustainable growth rate = 0.2(1-0.25) = 0.15. k = 0.02 + 1(0.07) = 0.09. Since 0.15 > 0.09,
sustainable growth rate shouldnt be used to value this stock. Use the historical growth rate:
V ( 0 )=
=$ 35.33 .