Chu Jun (Joyce) Su
U25415030
FE 445 Assignment Part B
June 12, 2013
Investment Policy Statement for the Newtown Symphony
Endowment Fund
Investment Objectives
Return Requirement: The fund should strive to provide a predictable stream of
income growing in l
PortfolioforaDonothing
FE445 Hamid C1
Submitted 4/30/13
Daniel Bolton, Vivian Chen, Sriharsh Singh
A portfolio constructed for Mr. Donothing
Table of Contents
TableofContents
Introduction
Give a man a fish, and you feed him for a day; show him how to catc
FE445: Solutions for HW 6
Lecture 13
1. Behavioralists point out that even if market prices are _ there may be
_.
A. distorted; only limited or no arbitrage opportunities
B. distorted; fundamental efficiency
C. allocationally efficient; limitless arbitrag
FE445: Solutions for HW 5
Lecture 10
1. A mutual fund with a beta of 1.1 has outperformed the S&P500 on average over the last 20
years. We know that this mutual fund manager _.
A. must have had superior stock selection ability
B. must have had superior as
Problem Set: Options
1. Eric is scouring market data looking for violation of put-call parity relationship. He comes
across the following data:
Apple, Inc. stock = $600
Call option on Apple (T = 3 months; X = $605) = $15
Put option on Apple (T = 3 months;
Company Analysis and Stock
Valuation:
Highlights
Company Analysis and Stock
Valuation
Good companies are not necessarily good
investments
Compare the intrinsic value of a stock to its
market value
Stock of a great company may be overpriced
Stock of a
PROBLEM SET: SECURITIES MARKETS
1. MARGIN TRADING
Problem 1: You want to purchase 100 shares at $40/share using initial margin of 50%.
Maintenance margin is 25%.
a) How much cash is required to purchase the shares?
b) How far does the stock have to fall b
ProblemSet12
Forward and Futures
1. Arakal Board of Trade offers futures contract on Google. Assume risk free interest rate is
0.25% per month and Google stock sells for $25 per share.
(a) Find the futures price (on Google) for delivery in 3 months.
(b) I
Risk and Return: Past
and Prologue
5
5.1 Rates of Return
Holding-Period Return (HPR)
Rate of return over given investment period
HPR= [PS PB + CF] / PB
PS = Sale price = $120
PB = Buy price = $100
CF = Cash flow during holding period = Div = $5
HPR
INDUSTRY ANALYSIS:
FACTORS TO CONSIDER
I. CLASSIFYING INDUSTRIES
There are several ways to classify industries:
1. By product or service (e.g., the chemical industry, the
airline industry, the restaurant industry, etc.).
2. Based on reactions to the busin
TEAM PROJECT
APPENDIXES 2A, 2B, 3A, 3B
Appendix 2A: Criteria for Industry Analysis
1.
a.
b.
c.
d.
List each criteria
Explain the criteria
Explain the rationale for including it (why this criteria and not some others)
Explain how you will measure based on
Problem Set: Equity Valuation
1. PV of Growth Opportunity (PVGO)
(a) Amero, Inc. reinvests 75% of its earnings in projects with ROE of 10%. The capitalization rate
on the stock is 15%. Investors expect year-end dividend of $1 per share, paid out of earnin
3A
AEPENDIX-
CRIEEEIA USED FOR COMPANYZEQEQZINSTRUHENT SELECIION
The following represent the criteria that I used when looking
for companies in which to invest:
1) Line g; gsiness The focus of a companys-activities should be
in an area in which it enjoys
Efficient Diversification
6
6.1 Diversification and Portfolio Risk
Market/Systematic/Nondiversifiable Risk
Risk factors common to whole economy
Unique/Firm-Specific/Nonsystematic/
Diversifiable Risk
Risk that can be eliminated by diversification
6-2
Fig
L23: Problem 17.4: Solution
T-bond future:
F0=$115,098
IMR=15%
what is your initial margin?
if F falls to $108,000 what is your percentage loss?
margin = 0.15 * $115,098 = $17,265
$ loss = $115,098 - $108,000 = $ 7,098
% loss = $7,098 / $17,265 = 41
L24: Problem 17.2
current S&P 500 level is 1200
annual dividend yield is 2%, rf = 1%
what should the futures price be for maturity T = 1yr ?
Remember:
F0 S 0 (1 r f s d )T
For financial assets s=0, so:
F = 1,200 * (1 + 0.01 - 0.02) = 1,188
Note that th
L25: Problem Solution
hedge fund with $2 billion assets
2/20 fee structure, 5% benchmark return
What is the total compensation of the management if:
0% return on assets
fixed fee = 0.02*2 = $40 million
incentive fee = 0
total fee = $40 million
25% ret
Lecture 23
Black-Scholes Formula
and
Futures
Where we are
Up to now:
derivatives:
options
credit default swaps
binomial option pricing
This lecture:
Black-Scholes model
derivatives
forwards and futures
2
Generalizing the Two-State Approach
Break up
Lecture 26
Final Review
Where we are
First half of course:
risk and return
portfolio management
Second half of course:
pricing assets
trading
This lecture:
short review of second half
does not include everything for final
final is from material fro
Lecture 25
Hedge Funds
Where we are
Up to now:
trading in assets and derivatives, valuation
CAPM alpha
arbitrage
mutual funds unable to produce alpha
This lecture:
can hedge funds deliver alpha?
what are their strategies?
2
Hedge Funds vs Mutual Fun
Cindy Castro
Cooper Davis
Codes:
Question
Instructions
Link your answers here from other worksheets
BA
CAKE Market (S&P)
BA
CAKE
1 Arithmetic Excess Return
Excess return standard deviation
2 Covariance BA and CAKE
Correlation BA and CAKE
3
50/50 portfolio
Problem Set: Bond Prices and Yields
1. Bond Prices and HPR
(a) Marcel - the Treasurer of Awwad, Inc. - wants to issue 8% coupon (paid semi-annually), 10year maturity bonds with a face value of $1,000. If similar bonds are priced to yield 9%, at what
price
SecuritiesMarkets
3
C
3.1 How Firms Issue
Primaryvs.SecondaryMarketSecuritySales
Securities
Primary
Newissuecreated/sold
Keyfactor:Issuerreceivesproceedsfromsale
Publicofferings:RegisteredwithSEC;salemadetoinvesting
public
Privateofferings:Notregist
PERFORMANCE
EVALUATION
Chapter 18
I. INTRODUCTION
Passive Management
Hold diversified portfolio with no security mispricing
identification
Cash
Virtually risk-free money market securities
Active Management
Forecasting broad markets and/or identifying m
Pre-exam Review
Final exam
2 hours, cumulative
Short answer questions only
Articles: 15%, from the 2nd half only
Concepts: 60% (20% from the 1st half, 80% from the
2nd)
Problems: 25% (20% from the 1st half, 80% from the
2nd)
2
The focus of this course
Inv
Oil companies: Unsustainable energy
Economist
October 11, 2014
This has been a nerve-racking summer for oil companies. Since June the price of a barrel of
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the lowest for
Dell shareholders approve founder's buyout proposal*
Aaron Ricadela
Bloomberg
September 12, 2013
Dell Inc. Chief Executive Officer Michael Dell won shareholder approval for a planned $24.9
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Financial economics: Efficiency and beyond
Economist
July 16, 2009
In 1978 Michael Jensen, an American economist, boldly declared that there is no other
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efficient-mark