The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
Hong Kong University of Science and Technology
FINA 3104: Investment Analysis and Portfolio Management
Fall 2011
Instructor: Prof. Darwin Choi
Homework Assignment 1 Empirical Properties of Returns & Returns Utility
Problem 1 Extracting Data from REUTERS
a
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
Hong Kong University of Science and Technology
FINA 3104: Investment Analysis and Portfolio Management
Fall 2012
Instructor: Prof. Darwin Choi
Homework Assignment 1 Empirical Properties of Returns & Returns Utility
Suggested Solution
Problem 1 Extracting
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
FINA 3104 Practice Problems
Index Models and APT
1. True or False (Briefly Explain)
(a) Over the past year, the realized return on stock A was 12% and on stock B was 10%. The
betas of A and B are 0.8 and 1.2, respectively. So the past years performance de
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
FINA 3104 Practice Problems
Portfolio Analyses and the Markowitz Portfolio Selection Model
1. True or False (Briefly Explain)
(a) The efficient frontier includes the set of all possible optimal complete portfolios. The
optimal complete portfolio is picked
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
FINA 3104 Practice Problems
The Capital Asset Pricing Model (CAPM)
1. True or False (Briefly Explain)
(a) If the CAPM holds, the return of a welldiversified portfolio with no diversifiable risk and
a = 1 is perfectly correlated (i.e., correlation = 1) wi
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
FINA3404InternationalFinanceHomework2
(Due October 17, 2014, 9:00 AM)
1. At the beginning of today, you purchased one futures contract at $1.30/. One contract
represents 125,000 . By the end of the day, the price had fallen to $1.25/. How much do you
gain
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
CHAPTER 7 FUTURES AND OPTIONS ON FOREIGN EXCHANGE
ANSWERS & SOLUTIONS TO ENDOFCHAPTER QUESTIONS AND PROBLEMS
QUESTIONS
1. Explain the basic differences between the operation of a currency fonNard market and a
futures market.
Answer: The fonNard market i
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
Introduction
FINA 3104: Investment Analysis and
Portfolio Management
The Hong Kong University of
Science & Technology
Fei Ding
Investment
What
is an investment?
Why
make an investment?
How
to make an investment?
What to invest?
What is an investment po
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
Forytobelessthan1.0(sothattheinvestorisalender),riskaversion(A)must
belargeenoughsuchthat:
y
E(rM ) rf
0.15 0.07
1 A
1.65
2
A M
0.222
Forytobegreaterthan1.0(sothattheinvestorisaborrower),riskaversionmust
besmallenoughsuchthat:
y
E(rM ) rb
1 A 0.15 0.09
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
Trading Securities
FINA 3104: Investment Analysis and
Portfolio Management
Hong Kong University of Science &
Technology
Fei Ding
Recap from Last Lecture
Classification Tree of Financial
Securities
Securities Indexes
Definition and Characteristics
Weights:
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
Securities
FINA 3104: Investment Analysis and
Portfolio Management
The Hong Kong University of
Science & Technology
Fei Ding
Recap from Last Lecture
Role of financial markets in bridging surplus sectors
(investors) & deficit sectors (business)
Direct Fina
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
Learning about
Returns & Risk
FINA 3104: Investment Analysis and
Portfolio Management
Hong Kong University of Science &
Technology
Fei Ding
Recap from Last Lecture
Types of Stock Orders (Market & Limit)
Buying on Margin (to leverage a long bet)
Short Sell
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 221 Practice Problems
Fall 2012
Managing FixedIncome Portfolios (Suggested Solution)
1. True or False
(a) Holding other factors constant, the Macaulays Duration of a bond is always increasing
with the bonds maturity.
Solution:
False. For deep discou
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 3104 Practice Problems
Fall 2012
The Efficient Market Hypothesis and Behavioral Finance (Suggested Solution)
1. True or False
(a) According to the efficient market hypothesis, if stock prices have gone up in the past they
should go down in the future
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 3104 Practice Problems
Fall 2012
Index Models and APT
1. True or False (Briefly Explain)
(a) Over the past year, the realized return on stock A was 12% and on stock B was 10%. The
betas of A and B are 0.8 and 1.2, respectively. So the past years perf
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 3104 Practice Problems
Fall 2012
Futures Markets (Suggested Solution)
1. True or False
(a) If a trader holding a long position in futures fails to meet the obligations of a futures
contract, the party that is hurt by the failure is the clearinghouse.
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 3104 Practice Problems
Fall 2012
The Capital Asset Pricing Model (CAPM)
1. True or False (Briefly Explain)
(a) If the CAPM holds, the return of a welldiversified portfolio with no diversifiable risk and
a = 1 is perfectly correlated (i.e., correlati
The Hong Kong University of Science and Technology
FINA 3104

Fall 2012
FINA 3104 Practice Problems
Fall 2012
FixedIncome Securities (Suggested Solution)
1. True or False
(a) A coupon bond that pays interest semiannually is selling at par value and has a coupon
rate of 5.6%. Without knowing the maturity, the discount rate o
The Hong Kong University of Science and Technology
FINA 3104

Fall 2015
Hong Kong University of Science and Technology
October 19, 2015
Investment Analysis (FINA3104)
MidTerm Exam (Version 2)
Problem 1: Risk, Return and Optimal Allocations (20 points)
You have been given the below probability distribution for one year holdin
The Hong Kong University of Science and Technology
FINA 3104

Fall 2015
Hong Kong University of Science and Technology
October 19, 2015
Investment Analysis (FINA3104)
MidTerm Exam (Version 1)
Problem 1: Risk Aversion (6 points)
The Risky Portfolio P has an excess return =12% and risk=20%.
1. What is the risk aversion of an i
The Hong Kong University of Science and Technology
FINA 3104

Spring 2014
The value of the 200 shares is
receive a margin call whe .
2001’ ~ $5,00
P. Equity is (200P — $5,0 . You will
"—" 0.30 x; when P a $35 or lower
In' '31 margin is 50% 0f$5,0
Total assets are $7,5 ($5,000 from the sale of the sto
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
CHAPTER 8: INDEX MODELS
PROBLEM SETS
1.
The advantage of the index model, compared to the Markowitz procedure, is the
vastly reduced number of estimates required. In addition, the large number of
estimates required for the Markowitz procedure can result i
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
PROBLEM SETS
1.
E(rp) = rf + p x [E(rM)  rf]
.16 = .06 + p X [.14  .06] p = .10/.08 = 1.25
2.
If the securitys correlation coefficient with the market portfolio doubles (with all
other variables such as varianc
The Hong Kong University of Science and Technology
FINA 3104

Fall 2014
FINA 3104 Module Intended Learning Objectives and Related Questions (Fall 2014)
Learning Objectives
Practice
Problems
on LMES
Related Questions
Textbook
Midterm Midterm
(Recommended
Fall
Fall
Problems)
2012
2013
1) The Investment Environment and
Financial