Solution to Problem Set 3 Foundations of Financial Markets Prof. Lasse H. Pedersen 1. (a) Recall that the general formula for expected return for a two-security portfolio is: E(Rp ) = w1 E(R1 ) + w2 E(R2 ) Also, the variance of return for a two-security p
Solution to Problem Set 2 Foundations of Financial Markets Prof. Lasse H. Pedersen 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
B8306
Capital Markets and Investments
Equity 6 - Using the CAPM
Fall 2016
Mamaysky
1
Topics for today
Recap
Negative betas
Long only and long-short portfolios
Using the CAPM to identify mispriced assets
A CAPM test: Beta sorted portfolios
Profiting from
B8306
Capital Markets and Investments
Equities 5 Using the CAPM
Fall 2016
Mamaysky
1
Midterm
Exam had 160 points
available (150 + 10
bonus)
All exam scores are out
of a maximum of 150
The bonus question can
only help
Midterm is only 20% of
your final
B8306
Capital Markets and Investments
Equity 3 The Efficient Frontier
Fall 2016
Mamaysky
1
Topics covered
1.
Introductory concepts
4.
Valuing cash flows: NPV; IRR; NoArbitrage methods
Shorting and leverage
2.
Fixed income
5.
3.
6.
Fall 2016
Valuation of
B8306: Capital Markets and
Investments
Fixed Income 1
Fall 2016
Professor Harry Mamaysky
Fall 2016
Mamaysky
1
Last time
Valuation approaches
Present valuing future cash flows
No arbitrage
Investment balance sheet
Fall 2016
Mamaysky
2
Todays class
Silv
B8306
Capital Markets and Investments
Fixed Income 2
Fall 2016
Mamaysky
1
Last class
Silver Inc.
Leverage and shorting
Bond institutional details
Zeros and coupon bonds
Fall 2016
Mamaysky
2
Todays class
Bond valuation
Zero coupon bonds (STRIPS) and spot
B8306
Capital Markets and Investments
Equity 4 The CAPM: Theory
Fall 2016
Mamaysky
1
Last class
Efficient frontier of 2 risky assets
Combining a risk-free and a risky asset (CAL)
Tells us E[Rp] as function of portfolio volatility (p)
The best CAL form
B8306
Capital Markets and Investments
Equity 2 Return, Risk, and
Diversification
Fall 2016
Mamaysky
1
Deutsche Banks troubles
Headlines:
Deutsche Bank Is
Asked to Pay $14
Billion to Resolve U.S.
Probe Into Mortgage
Securities, WSJ Sep
16, 2016
Hedge fun
ProblemSet4:BuckeyeComputers
ValuationExercise
Instructions: This problem set is due Monday November 21st. You should submit an
electronic copy of your excel solution on Canvas. You must upload your solution strictly
prior to the start of class for your c
financial
services
august 2007
Connecting employees to create
value in investment banks
Leaders used to have few options for changing their companies, except focusing on
financial performance and walking the halls. Thats no longer true.
Vijay DSilva and O
Investment Banking (FINC-GB.2334.00)
Guide: Course Readings and Case Studies
Summer 2013
Professor Militello
Please utilize the below guide to plan and guide your readings and case work initiatives. The posted
outline/schedule of topic coverage has also b
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Definitions
Private equity For the purposes of the PEI 300, the definition of private equity is capital raise
for a dedicated programme of investing directly into businesses. This includes equity capital for
iversified private equity, buyouts, growth equi
Solutions to Problem Set 1
1. (a) You have sold 10,000 shares at the ask price of 102 1/2. You bought 4,000 shares at a bid price 102 1/4. Thus, 6,000 shares are sold short (sold without already owning the security). Your revenue from the 4,000 "round tri
Solution to Problem Set 6 Foundations of Financial Markets Prof. Lasse H. Pedersen 1. (a) We know that the standard deviation of returns on an individual security (in this case equal to .5) is not relevant for determining its expected return according to
Solution to Problem Set 10 Foundations of Financial Markets Prof. Lasse H. Pedersen 1. The option price tree is: t=0 t=1 t=2 10 9.52 6.80 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
Challenging Problem 1: Continuous Compounding
Foundations of Financial Markets
Prof. Lasse H. Pedersen
As described in RWJ 5.3., a quoted rate of Q, which is compounded m times
a year, corresponds to a eective annual rate (EAR) of
EAR = (1 + Q/m)m 1.
Cons
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