FINA 3080EFG: Spring 2015
Problem Set 2 (Stocks and Portfolio Theory)
Prof. CAO
Hello and welcome to Problem Set #2!
There are 4 required questions (150 points total)
The problem set is due in the class, or the homework drop box in CYT Building (with labe
Chapter 1-4
14
Real Versus Financial Assets
Essential nature of investment
Reduce current consumption in hopes of greater
future consumption
Investments:
Background and
Issues
Real Assets
Used to produce goods and services: Property,
plant & equipment
FINA 3080 EFG: Spring 2015
Problem Set 1 (Bonds)
Prof. Jie CAO
Hello and welcome to Problem Set 1!
There are 7 required questions (150 points total)
The problem set is due in the class, or the homework drop box in CYT Building (with label for each session
25 Rexare GMBH Environmentally Friendly Paper (list)
1. Approximately how much profit is trees required have been cut, replacepaper from these trees has
been.?
A 9,000
B 125,000
C 1.32 million
D 2.67 million
E 3.74 million
2. Approximately how many trees
30 Zone 5 Assembly Line Report (list)
1. If all staff were required to work on assembly line A for cars, approximately how many cars would
be produced a day if staff from other lines are only required to work their normal daily hours?
A 150
B 220
C 290
D
28 World Fossil Fuel Regulation (list) (Practice)
1. At the continued rate of extraction, in how many years is the coal from the Folen Mine likely to run
out?
A 1.5 yrs
B 3 yrs
C 4.5 yrs
D 6 yrs
E 7.5 yrs
2. If there are 22.36 million homes in the UK, app
29 Yearly Income (list)
1. Other income is expected to drop by 70% in Year 3 and exceptional costs are predicted to double. If
turnover changes as from Year 1 to Year 2, and cost of sales and overheads remain as for Year 2, what will the
percentage change
24 Red Pertroleum Inc-6 Month Target Review (list)
1. 6 total oil production cost
A 2 million
B 18 million
C 109 million
D 404 million
E 414 million
2. What was the approximate cost of total oil production in Month 1?
A 2.25 million
B 4.23 million
C 7.12
FINA 3080 FG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 7A
Diversification and Optimal Portfolios
FINA 3080 FG Spring 2016 Prof. Jie CAO
1
Lecture 7A Outline
The benefit of diversification
Constructing the efficient frontier by m
Measuring Ex-Post (Past) Returns
Chapter 5
One period investment: regardless of the length of the
period.
period
Holding period return (HPR):
HPR = [PS - PB + CF] / PB
where
PS
= Sale price (or P1)
PB
= Buy price ($ you put up) (or P0)
CF
= Cash flow duri
Chapter 8
8.1
8 1 Random Walks and the
Efficient Market
Hypothesis
The Efficient
Market
Hypothesis
8-2
Implications of Efficiency
Efficient Market Hypothesis (EMH)
Do security prices accurately reflect information?
Informational Efficiency
Are price cha
Chapter 10
10.1
10 1 Bond Characteristics
Bond Prices
and Yields
10-2
U.S. Credit Market Instruments O/S 2008 Q3
U.S. Credit Market Instruments O/S 2008 Q3
U.S. Equity Market (Common)
$19,648 Billion
By Selected Major Borrowers (Not Exhaustive List)
$11,2
23 Philippine Economic Summary (list)
C
A
3. In which year was the geartest number of people unemployed in Philippines?
A. 1997
B. 1998
C. 1999
D. 2000
E. Cannot say
4. What was the percentage increase in population from 1997 to 1999?
A. 12.5%
B. 15.0%
C.
6 Commnet and Intercall (bar)
E
B
3. Commnet Commnet Intercall
A. 10%
B. 11%
C. 12%
D. 13%
E.
4. Commnet Intercall
A. 12%
B. 14%
C. 16%
D. 18%
E.
5. Intercall Commnet IntercallCommnet
A. 1:3
B. 1:2
C. 2:1
D. 3:1
E.
Lecture 1
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 1
Introduction and Overview
FINA3080EFGSpring2017Prof.JieCAO
1
Lecture 1
About Myself
Name: CAO, Jie (Jay)
Chinese:
Ph.D. in Finance (2009) from
McCombs School
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 7
Diversification and Optimal Portfolios
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 7 Outline
The benefit of diversification
Constructing the efficient frontier by m
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 8A
CAPM
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 8A Outline
Capital asset pricing model (CAPM)
Intuition
Implications
FINA 3080 EFG Spring 2017 Prof. Jie CAO
2
Ca
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 4A
Interest Rate Sensitivity
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 4A Overview
Bond Pricing Relationships
Find Zero prices at different interest rates
Define a
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 5A
Introduction to Valuing Equity
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 5A Overview
Concepts behind equity valuation
Claim on assets residual cash flows (CFs)
FINA 3080EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 3A
Bond Prices and Yields
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 3A Outline
Bond characteristics
Bond pricing
All no-default bonds are portfolios of Zeros
Arbitra
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 6A
Risk Aversion and Capital Allocation
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 6A Outline
Properties of the investment environment
Preview of the portfolio choice
FINA 3080 EFG
Investment Analysis and
Portfolio Management
Prof. Jie CAO
Lecture 2A
Financial Market and Instruments
FINA 3080 EFG Spring 2017 Prof. Jie CAO
1
Lecture 2A Overview
Assets and financial market
Equity instruments
Debt instruments
Money ma
The format will be multiple choices
John invests $100 at the beginning of the year. His investment grows 5% and earn a
dividend of $4. The Holding Period Return,HPR ,was .
Which return measure should be used to measure the performance of your invest
The Efficient
Market
Hypothesis
8
1
MY BELIEVE
See Graham rules 1137.xls
Those with computers/smartphone, try one
stock to see if we can have one fulfilling the
rules.
OUTCOMES
CHECK IF YOU CAN DO/UNDERSTAND THE FOLLOWING
AFTER CLASS
The Efficient Market
Behavioral Finance
and
Technical Analysis
9
1
OUTCOMES
CHECK IF YOU CAN DO/UNDERSTAND THE FOLLOWING
AFTER CLASS
Behavioral biases and their effect on
investment decisions
Application of technical analysis to
investment decisions
2
9.1 BEHAVIORAL CRITIQU
Efficient
Diversificatio
n
6
OUTCOMES
CHECK IF YOU CAN DO/UNDERSTAND THE FOLLOWING
AFTER CLASS
Understand systematic and nonsystematic
risk
Appreciate the benefit of diversification
Allocate two risky assets
Efficient diversification with many assets
Chapter 7
7.1
7 1 The Capital Asset
Pricing Model
Capital Asset
Pricing and
g
Arbitrage
Pricing Theory
7-2
Capital Asset Pricing Model
(CAPM)
Simplifying Assumptions
Equilibrium model that underlies all modern financial theory
Derived using principles of