Some useful formulas
E(ri) rf = i (E(rM ) rf )
Cov(ri, rM )
i
= (ri, rM )
i =
2
M
M
p =
n
X
wi i
i=1
i = E(ri) rf i (E(rM ) rf )
PB =
T
X
Coupon
t=1
(1 +
r)t
+
Par Value
= Coupon P A(r, T ) + Par Value P F (r, T )
(1 + r)T
1
P A(r, T ) =
1
(1+r)T
r
,
P F
Portfolio Choice & Mean-Variance Analysis, Part 1
Finance Investments
Matthew M Wynter
University of Illinois at Chicago, College of Business Administration
Fall 2015
Wynter (UIC)
Portfolio Choice
Fall 2015
1 / 40
One Risky Asset
Choice Between a Risky an
Capital Asset Pricing Model
Business Finance Investments
Matthew M Wynter
University of Illinois at Chicago, College of Business Administration
Fall 2015
Wynter (UIC)
CAPM
Fall 2015
1 / 29
What is the Tangency Portfolio?
Mean-Variance Analysis
CAPM Implic
Homework 1, FIN 510
Prof. Hanh Le
Due at the start of class on Wednesday, September 13
Instructions: For questions 1-5, please write down your choice but do not show workings.
For all other questions, please show your workings.
1. (0.3 pts) You purchased
Course Introduction & Overview of Investments
Business Finance Investments
Matthew Wynter
University of Illinois at Chicago, College of Business
Fall 2015
Wynter (UIC)
Course Introduction & Overview
Fall 2015
1 / 35
Course Overview
Security Markets and In
Trading & Markets
Finance Investments
Matthew M Wynter
University of Illinois at Chicago, College of Business Administration
Fall 2015
Wynter (UIC)
Trading & Markets
Fall 2015
1/1
Where do securities trade?
Primary Markets
Initial public oerings (IPO)
Sea
Risk and Return
Finance Investments
Matthew M Wynter
University of Illinois at Chicago, College of Business Administration
Fall 2015
Wynter (UIC)
Risk and Return
Fall 2015
1/1
Quantifying Risk
Risk Example
Which do you prefer?
A: $10,000 for sure
B: Flip
PV, Arbitrage, and Ecient Markets
Business Finance Investments
Matthew Wynter
University of Illinois at Chicago, College of Business
Fall 2015
Wynter (UIC)
Ecient Markets
Fall 2015
1 / 40
Returns and Present Value
How much would you pay for the following
Course Introduction & Overview of Investments
Business Finance Investments
Matthew Wynter
University of Illinois at Chicago, College of Business
Fall 2015
Wynter (UIC)
Course Introduction & Overview
Fall 2015
1 / 35
Course Overview
Security Markets and In
INVESTMENTS
Lecture Outline/Notes
Oleg Bondarenko
Chapter 1: The Investment Environment
What is an Investment?
An investment is the current commitment of money or other resources for
a period of time in order to derive future payments that will compensate
Ch 1
7.
a. The bank loan is a financial liability for Lanni. (Lanni's IOU is the bank's
financial asset.) The cash Lanni receives is a financial asset. The new financial
asset created is Lanni's promissory note (that is, Lannis IOU to the bank).
b. Lanni
Ch. 9
1.
E(rP) = rf + P [E(rM ) rf ]
18 = 6 + P(14 6) P = 12/8 = 1.5
10
Not possible. Portfolio A has a higher beta than Portfolio B, but the expected return for Portfolio A is
lower than the expected return for Portfolio B. Thus, these two portfolios can
Some questions from old exams. Exam 2
Multiple-choice questions.
1. An underpriced security will plot
A)
B)
C)
D)
the market.
E)
deviation.
Ans:
on the Security Market Line.
below the Security Market Line.
above the Security Market Line.
either above or b
FIN 510: INVESTMENTS
Spring 2016
Pr. Oleg Bondarenko
Project 2
General instructions: The objective of the project is to enhance students understanding of
principles of the portfolio theory. One report should be submitted for each group and everyone in a
g
FINANCE 510: INVESTMENTS
Spring 2016
Pr. Oleg Bondarenko
Homework Assignment 2
Note that this problem set will not be collected. Solutions to the problem set will be
provided on the course website.
You should work the assigned problems as preparation to E
FINANCE 510: INVESTMENTS
Spring 2016
Pr. Oleg Bondarenko
Homework Assignment 1
Note that this problem set will not be collected. Solutions to the problem set will be
provided on the course website.
You should work the assigned problems as preparation to E
FIN3043 Investment Management
Assignment 2 (Due: 1pm, 4th Dec 2015)
Questions from Chapter 8: Problem 2, 17
Questions from Chapter 9: Problem 5, 18, 19
Questions from Chapter 12: Problem 5, 17, 19
Questions from Chapter 13
7. Even Better Products has come