Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E FIN AP
Coordinator:
Frode Brevik
Date:
October 24, 2013
Time:
08.4511.30
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number o
Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E FIN AP
Coordinator:
Frode Brevik
Date:
December 12, 2013
Time:
08.4511.30
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number
Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E FIN AP
Coordinator:
Frode Brevik
Date:
October 25, 2012
Time:
08.4511.30
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number o
Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E FIN AP
Coordinator:
Frode Brevik
Date:
October 29, 2010
Time:
8:45
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number of ques
Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E-FIN-AP
Coordinator:
Frode Brevik
Date:
December 12, 2011
Time:
8:45
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number of que
Faculty of Economics and Business Administration
Exam:
Asset Pricing 4.1
Code:
E FIN AP
Coordinator:
Frode Brevik
Date:
December 16, 2010
Time:
15:15
Duration:
2 hours and 45 minutes
Calculator allowed:
Yes
Graphical calculator
allowed:
Yes
Number of qu
Sample exam solution, Investments 4.1, October 29, 2010
1. (a) The F.O.C. of the investor is
d
Rf + E[Re ]
dw
2
e
= E[R ] 2
2
= E[Re ]
0=
Premultiplying both sides with (1/)1
=
(b)
1 1
e
Et [Rt+1 ]
i. The optimal portfolio weights for the risky assets
Solution Key: December 2011
1. (a) From
25
1
1
w = 1 (E[R] Rf ) = 0
8
0
0
100
0
0
0.04
1/8
0 0.05 = 5/8
100
0.1
10/8
we see that the investor should allocate 12.5 % of his wealth to asset 1, 62.5 % of his wealth
to asset 2, 125 % of his wealth to asset
Solution key, December 2010
1. (a)
=
1 0.09
2 0.027
0.027
0.09
1
1 12.21 3.663
0.05
=
0.01
2 3.663 12.21
0.05
0.2869
=
0.01
0.0305
(b) Its negative covariance with the return to the rst asset means it works as a hedge against
bad returns to the rst asset.
Solutions, Week 5
0 (a) First you should recognize that this is an AR(1) process with = 0.1. So we know that the
jth correlation coecient is (0.1)j . And that the unconditional variance is 2 /(1 2 ) =
0.052
1
Using the normal formulas for sums gives us:
1
Week 3 review questions
1. (a)
E[Re ] 12(0.7%) = 8.4%
(b) This is the same as nding the tangency portfolio between the RAF and the
MVF, which we do by nding an arbitrary mean-variance ecient portfolio
using our formula and then scaling it so the weights s
Solutions, week 2 review questions
1. Equilibrium and CAPM.
(a) At these prices, the expected excess returns to the two assets are given by:
2.22/2 1.05
0.06
=
1.08/1 1.05
0.03
Et [Re ] =
and their covariance matrix by
=
0.04 0
0 0.04
So the optimal portf
Week 3 review questions
1. From table III in Frazzini-Pedersen the the betting-against-beta factor has an
expected excess monthly return of 0.7, and an annualized volatility of 0.11. It has
no covariance with the excess return to the market.
(a) Find the
Solutions, Week 1
1.
1
2W
1
RA (W ) =
W
3
RA (W ) =
W
RA (W ) = 2
RA (W ) =
RR (W ) =
1
2
RR (W ) = 1
RR (W ) = 3
RR (W ) = 2W
Notice that the rst 3 utility functions are of the Constant Relative Risk Aversion class, and the
last one is a Constant Absolut