Dr. Randall R. Rojas
Economics 106V
Department of Economics
Investments
UCLA
Summer, 2015
Midterm Exam
July 9, 2015
First Name
Last Name
UCLA ID #
TA/Section
Please do not start the exam until instructed to do so.
Part I: Short Answers
For full credit on
Econ 106V
Homework 7 (Chapters 20 & 21)
Chapter 20:
6.
In terms of dollar returns, based on a $10,000 investment:
Stock Price
All stocks (100 shares)
All options (1,000 options)
Bills + 100 options
Price of Stock 6 Months from Now
$80
$1
Solution to Problem Set 8
Investments
Prof. Pierre-Olivier Weill
1. The option price tree is:
t=0
t=1
t=2
10
9.52
6.80
10
4.76
0
This is seen as follows:
(a) If the stock price is 144 or 108 at maturity, then the option is worth 10. If the
stock price is
Problem Set 8
Investments
Prof. Pierre-Olivier Weill
1. Suppose that the risk-free rate is 5%, that Legos stock is currently at $100, and that,
the next two years, the stock price movements are well approximated by the following
tree:
t=0
t=1
t=2
144
120
Economics 106V: Midterm
Summer 2012, UCLA
Instructor: Dr. Rojas
07/18/12
For full credit on a problem, you need to show all your work.
Name:
Section/TA:
1.(10%) Suppose the risk-free return is 4% and the market portfolio has an expected return of 10%
and
Solution to Problem Set 7 Investments Prof. Pierre-Olivier Weill 1. An investor wants to capture prots if Microsoft declines in price but wants loss no greater than $10 if prices increase. Only one transaction is permitted. Solution: The investor should b
Solution to Problem Set 1
Investments
Prof. Pierre-Olivier Weill
1. (a) Allowing you to reinvest at 1% per day means that you are earning compound
interest on your initial $100 investment. The formula for P growing to F for one year
at a compound rate r p
Investments
Professor Pierre-Olivier Weill
1
Todays Class
Practical Information about the class Overview of class:
Outline of topics covered The axioms underlying finance The main insights of finance
First topic of the class: financial instruments and ma
Homework 3 Solution (Part II)
Econ 106V
Chapter 8: Problem 8
a.
Firm-specific risk is measured by the residual standard deviation. Thus, stock
A has more firm-specific risk: 10.3% > 9.1%
b.
Market risk is measured by beta, the slope
Homework 2 Solution
Econ 106V
Problem 1
(See Excel File)
Problem 2
BKM Chapter 6: Problem 17
a.
E(rC) = rf + y [E(rP) rf] = 8 + y (18 8)
If the expected return for the portfolio is 16%, then:
16% = 8% + 10% y
Therefore, in
Problem Set 6
Investments
Prof. Pierre-Olivier Weill
1. The stock PolarBear.com trades on both the South Pole Stock Exchange and the
North Pole Stock Exchange.
(a) Suppose the price on the North Pole is $18. What does the No-Arbitrage
Condition say about
Econ 106V
Homework 3 (Part I)
For questions 1 and 2 assume the following: You manage a risky portfolio with
expected rate of return of 18% and standard deviation of 28%. The T-bill rate is 8%.
You can assume
Solutions to *NEW* Problem Set 6 Investments Prof. Pierre-Olivier Weill 1. Suppose you buy a seven-year zero-coupon Treasury bond, with a face value of $1000, at a price P0 = $600. Answer the following questions: (a) What is the yield to maturity (YTM) on
Problem Set 3
Investments
Prof. Pierre-Olivier Weill
1. Suppose that a fund that tracks the S&P has mean E (Rm ) = 16% and standard
deviation M = 10%, and suppose that the T-bill rate Rf = 8%. Answer the
following questions about ecient portfolios:
(a) Wh
Solutions to Problem Set 2
Investments
Prof. Pierre-Olivier Weill
Consider the following probability distribution for stock ABC and XYZ:
Scenario
Probability
Return of ABC
Return of XYZ
1
2
3
0.3
0.5
0.2
0.07
0.11
-0.16
-0.09
0.14
0.26
1. Calculate the ex
Economics 106V Investments: Lecture Note-10
Daisuke Miyakawa UCLA Department of Economics July 11, 2008
10th lecture covers the following items: (1) The basic ideas of option pricing, (2) an option pricing theory (APT), and (3) the Sketch of Black S
Solution to Problem Set 7
Investments
Prof. Pierre-Olivier Weill
1. An investor wants to capture prots if Microsoft declines in price but wants loss no
greater than $10 if prices increase. Only one transaction is permitted.
Solution:
The investor should b
Financial axioms
Investors prefer more to less
Investors are risk-averse
Money paid in the future is worth less than the same amount paid today
Financial markets are competitive
Foundations of finance
Optimal portfolio selection dont put all of your
Dr. Randall R. Rojas
Economics 106V
Department of Economics
Investments
UCLA
Fall, 2014
Midterm Exam
November 13, 2014
First Name
Last Name
UCLA ID #
TA/Section
Please do not start the exam until instructed to do so.
Part I: Short Answers
For full credit
Solutions to Problem Set 2 Investments Prof. Pierre-Olivier Weill Consider the following probability distribution for stock ABC and XYZ:
Scenario 1 2 3
Probability Return of ABC Return of XYZ 0.3 0.5 0.2 0.07 0.11 -0.16 -0.09 0.14 0.26
1. Calculate the ex
Problem Set 1 Investments Prof. Pierre-Olivier Weill 1. Suppose a hedge fund manager earns 1% per trading day. There are 250 trading days per year. Answer the following questions: (a) What will be your annual return on $100 invested in her fund if she all
UNIVERSITY OF CALIFORNIA, LOS ANGELES
UCLA
BERKELEY DAVIS IRVINE LOS ANGELES RIVERSIDE SAN DIEGO SAN FRANCISCO
SANTA BARBARA SANTA CRUZ
PIERRE-OLIVIER WEILL
DEPARTMENT OF ECONOMICS
[email protected]
SAMPLE FINAL QUESTIONS
Question 1
Suppose that the r
Solution to Problem Set 6
Investments
Prof. Pierre-Olivier Weill
1. (a) To rule out arbitrage, the price on the South Pole must be the same as on the
North Pole, $18.
(b) You can make an arbitrage by buying on the the South Pole for $17 and selling
on the
Economics 106V Investments: Lecture Note-8
Daisuke Miyakawa UCLA Department of Economics July 11, 2008
8th lecture covers the following items: (1) The interest rate risk on the price change of a bond, (2) duration, (3) convexity, (4) the bond managem
Problem Set 4
Investments
Prof. Pierre-Olivier Weill
1. Given the following information, Rf = 0.06, E(RM ) = 0.12,
following questions.
M
= 0.15, answer the
(a) What is the numerical value of the equilibrium risk premium (that is, the excess
return on the
Problem Set 1
Investments
Prof. Pierre-Olivier Weill
1. Suppose a hedge fund manager oers a return of 1% per trading day if you invest in
her fund. There are 250 trading days per year. Answer the following questions:
(a) What will be your annual return on
Problem Set 2
Investments
Prof. Pierre-Olivier Weill
Consider the following probability distribution for stock ABC and XYZ:
Scenario
Probability
Return of ABC
Return of XYZ
1
2
3
0.3
0.5
0.2
0.07
0.11
-0.16
-0.09
0.14
0.26
1. Calculate the expected return
Problem Set 3
Investments
Prof. Pierre-Olivier Weill
1. Suppose that a fund that tracks the S&P has mean E(Rm ) = 16% and standard
deviation M = 10%, and suppose that the T-bill rate Rf = 8%. Answer the
following questions about efficient portfolios:
(a)
Quiz after Class 15
3/17/17, 9:49 PM
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