Homework Solution: Investment Science
Solution Problem 6.2: Dice Product
Let \3 be the outcome of each dice 3 " #. Then the \3 random
variables are mutually independent. Define: ] \3 That is, ] is the
8
3"
product of the dice outcomes. We have with the st

Homework Solution: Investment Science
Solution Problem 7.2: A Small World
Consider a world in which there are only two risky assets, E and F and a
risk free asset J The two risk assets are in equal supply in the market; that
is,
<Q
"
<E <F .
#
#
The foll

Homework Solution: Investment Science
Solution Problem 8.1: A Simple Portfolio
Someone who believes that collection of all stocks satisfies a single factor
model with the market portfolio serving as the factor (implying CAPM)
gives the information on the

Homework Solution: Investment Science
Solution Problem 5.2: The Road
Project # or 4 are carried out B# B% "
Project ' or ( are carried out B' B( "
Add constraint:
B# B% " B' B( !
Observe:
B# B % " B ' B ( "
Hence, if projects # or % are carried out, eithe