MGMT 141
Midterm 2
Wednesday November 14, 2012
Chong Huang
There are two questions. Do both questions. Start each question on a new page, clearly labeled.
The exam is worth 60 points in total. Justify all answers and show all work. Label all diagrams
clea
Problem Set 3, Chapter 5
6. You are considering the choice between investing $50,000 in a conventional 1-year bank CD offering
an interest rate of 5% and a 1-year Inflation Plus CD offering 1.5% per year plus the rte of inflation.
a. Which is the safer in
MGMT 141
Homework 8
June 8, 2014
Jie Gao
1. XYZ companys stocks are publicly listed.
(a) Investors can only have the historical data of XYZs stocks price. Assume the
market for XYZs stock is ecient in the weak form, and the capital cost is 10%.
Then if th
Problem Set 6: Chapter 24
4. Consider the rate of return on stocks ABC and XYZ.
Year
1
2
3
4
5
a.
b.
c.
d.
rABC
20%
12
14
3
1
RXYZ
30%
12
18
0
-10
Calculate the arithmetic average return on these stocks over the sample period.
Which stock has greater disp
Problem Set 5: Chapter 9
4. Here are data on two companies. The T-bill rate is 4% and market risk premium is 6%.
Company
Forecasted return
Standard deviation of return
Beta
$1 Discount Store
12%
8%
1.5
Everything $5
11%
10%
1.0
What would be the fair retu
Problem Set 1, Chapter 2 #8, 9, 13, 16, 18, 20
1. Suppose investors can earn a return of 2% per 6 months on a treasury note with 6 months remaining
until maturity. What price would you expect a 6 month maturity treasury bill to sell for?
9. Find after tax
Summary of Capital Market Expectations
1. Draw the connections between GDP and Earnings Growth.
2. Look at the historical record for the various asset classes. Ultimately forecast your portfolio risk and return.
(Chapter 5)
3. Determine approximately wher
Easiest way to beat the market: Leverage the
market index.
EMH Failure: Investor irrationality pushes down
prices of value stocks (so higher returns) CAPM
Failure: Prices do reflect available information, but
there are other risk-factors
New information i
Investments
Week 9
David C. Yang
University of California, Irvine
David C. Yang (2016)
Assignment due next week
Problems: BKM Chapter 18, Problem 10, 12,
13; CFA 1a, 4
David C. Yang (2016)
2
Reminder: Guest Speaker
Date: Tuesday
Investments
Week 6
David C. Yang
University of California, Irvine
David C. Yang (2016)
Assignment due next week
Problems
BKM Ch 11, Problem 4, 5, 12, 22. CFA 1, 9.
Added: #4, #22.
Dropped: #9, #19, CFA 6
Dimensional Fund Adv
Sample Quiz Questions
1
Bond market indexes can be difficult to construct because
A. they cannot be based on firms' market values.
B. bonds tend to trade infrequently, making price information difficult to obtain.
C. there are so many different kinds of b
Investments-Quiz 2 Outline
You will have 80 minutes to complete the exam
1 Page of study notes (8x11, one side only). You may use your financial
calculator (or phone app) for any calculations.
The first quiz covered the introduction to the portfolio manag
MGMT 141 Lecture 6
Portfolio Theory III
Chong Huang
Paul Merage School of Business, University of California, Irvine
April 22, 2014
Chong Huang (UCI)
MGMT 141 Lecture 6
April 22, 2014
1 / 14
Portfolio with Many Risky Securities
Fix a weight h, we can a po
MGMT 141 Lecture 4
Portfolio Theory I
Chong Huang
Paul Merage School of Business, University of California, Irvine
April 15, 2014
Chong Huang (UCI)
MGMT 141 Lecture 4
April 15, 2014
1 / 18
Return
The reason for security investments is the return they may
MGMT 141 Lecture 7
Portfolio Theory IV
Chong Huang
Paul Merage School of Business, University of California, Irvine
April 24, 2014
Chong Huang (UCI)
MGMT 141 Lecture 7
April 24, 2014
1 / 11
Capital Allocation Line
E(r)
P
F
P
A portfolio consisting of the
MGMT 141 Lecture 3
Buy on Margin and Short Sell
Chong Huang
Paul Merage School of Business, University of California, Irvine
April 10, 2014
Chong Huang (UCI)
MGMT 141 Lecture 3
April 10, 2014
1/8
Buying on Margin: Example
An investor wants to buy IBM stoc
MGMT 141 Lecture 12
Arbitrage Pricing Theory
Chong Huang
Paul Merage School of Business, University of California, Irvine
May 27, 2014
Chong Huang (UCI)
MGMT 141 Lecture 12
May 27, 2014
1/8
Review: CAPM
All investors will choose to hold a portfolio of ris
MGMT 141 Lecture 13
Arbitrage Pricing Theory
Chong Huang
Paul Merage School of Business, University of California, Irvine
May 29, 2014
Chong Huang (UCI)
MGMT 141 Lecture 13
May 29, 2014
1/7
Well-Diversied Portfolios
The risk of holding the portfolio P con
MGMT 141 Lecture 2
Buy on Margin
Chong Huang
Paul Merage School of Business, University of California, Irvine
April 8, 2014
Chong Huang (UCI)
MGMT 141 Lecture 2
April 8, 2014
1 / 12
Types of Orders in Secondary Market
Market orders are buy or sell orders
MGMT 141
Homework 4
May 9, 2014
Chong Huang
1. The market has two traded risky assets, A and B. We know that E(rA ) = 0.4, E(rB ) =
0.6, A = 2, B = 3, and AB = 0. Suppose the market portfolio is M = 0.3A+0.7B.
The risk free asset has a rate of return rf =
MGMT 141
Homework 5
May 13, 2014
Chong Huang
1. The market portfolio (M ) has the expected rate of return E(rM ) = 0.12. Security A is
in the market portfolio. We know E(rA ) = 0.17 and A = 1.5.
(a) What is the rate of return of the risk-free asset (rf )?
MGMT 141 Lecture 8
Capital Asset Pricing Model
Chong Huang
Paul Merage School of Business, University of California, Irvine
May 6, 2014
Chong Huang (UCI)
MGMT 141 Lecture 8
May 6, 2014
1/5
Portfolio Choice
Two weeks ago, we analyzed investors optimal risk
Justin Lumley
74937242
Equity Risk Premium
1. The equity risk premium represents the difference between the S&P 500 index over 10 years,
and a 10-year Treasury Inflated-Protected Securities bond. A positive number would represent
more return in the stock
Chapter 3 BKM Problems: 3, 4, 5, 6, 7, 14, 15, CFA2
3.
Buying on margin implies that the investor only needs to put down a portion of the purchase
cost, while the rest of the cost is borrowed by a broker. This allows the investor to invest more
money than
Justin Lumley
1/18/19
MGMT 141 Assignment Chapter 2 Shiller
3. The Fed Model was described by Robert J. Shiller as the negative correlation between the
stock market and interest rates. When interest rates began to fall, stock prices seemed to
increase and
Justin Lumley
BKM Chapter 14 Problems
5) A bond with an annual coupon rate of 4.8% sells for $970. What is the bonds current yield?
Coupon rate = 4.8%, currernt market price = $970, Par value = $1,000
Current yield = (4.8% * $1,000)/$970 = 4.95%
16) A bon