EF5052: Investments
Professor Jay Li
Homework 3
NOTE: Answers must be justified. Correct answers without explanation will not be
given credit.
Problem 1
Consider the mean variance utility U for two risk averse investors, one with risk aversion
(A) of 2 an

Answers to practice problems for Lecture 1&2
Chapter 2
1.
To find owners equity, we must construct a balance sheet as follows:
CA
NFA
TA
Balance Sheet
CL
LTD
OE
$32,700
TL & OE
$ 5,700
27,000
$ 4,400
12,900
?
$32,700
We know that total liabilities and own

Introduction
Stocks
Securities Markets
Securities trading
Investment Companies
Statistics and Probability
EF5052 Investments
Lecture Notes Set 1
Jay Li
City University of Hong Kong
Jay Li
EF5052 Investments: LN 1
Introduction
Stocks
Securities Markets
Sec

EF 5052
Professor Jay Li
EF 5052 - Homework 1 - Answers
1. Spreadsheet on the class web page calculates these values using Excel functions.
(a) Statistics:
E ()
2 ()
()
Y
-0.458166667
94.66262879
9.729472174
X
-0.173666667
22.66737955
4.761027153
(b) Fo

EF5052: Investments
Professor Jay Li
Homework 5
Question 1.
Download the spreadsheet apm1.xls for this homework. It contains excess returns (adjusted for inflation) for
decile portfolios of NYSE/NASDAQ stocks sorted by their capitalization (size) each yea

EF5052
Professor Jay Li
EF5052 - Homework 2 - Answers
1. UBID-MALL
(a) The spreadsheet on the answer page has details of calculations. With
$19 Mil. it is possible to support about 448,377 shares short of UBID
and a matching 1.4 as many (628000-629000) lo

EF 5052: Investments
Professor Jay Li
Homework 1
Problem 1. For the following set of questions you will need to use the Excel data file
from the class webpage. It contains observations about two variables X and Y. Use Excel
formulae given in the lecture n

EF5052 Homework 6 Answers
1. (a) Using pricing equation of the onefactor APT we nd rf and 1 :
8% = Er1 = rf + 1 0.5
13.6% = Eri = rf + 1 1.2
Solving two equations for two unknowns gives rf = 4% and 1 = 8%.
(b) Portfolio with sensitivity of 1 supposed to e

EF 5052: Investments
Professor Jay Li
Homework 2
Problem 1. UBID-MALL continued.
a)
Suppose you have $20,000,000 ($20M) of investable capital. You can buy shares on the
margin and sell shares short. Initial margin is 50% and maintenance margin is 30% for

Professor Jay Li
EF5052 - Homework 3 - Answers
1. (a) We can compute the utiltiy of each investment opportunity to
rank them. For the investor with A = 2, we have utlity equal to
(i) 0.03, (ii) 0.04, and (iii) 0.02, therefore the ranking (from best
to wor

Motivation
Factor Models
APT - Arbitrage Pricing Theory
EF5052 Investments
Lecture Notes Set 8
Jay Li
City University of Hong Kong
Jay Li
EF5052 Investments: LN 8
Motivation
Factor Models
APT - Arbitrage Pricing Theory
Outline
1
Motivation
2
Factor Models

Indexes
Risk-adjusted fund performance evaluation
Selection bias and fund performance
Measuring market timing
EF5052 Investments
Lecture Notes Set 9
Jay Li
City University of Hong Kong
Jay Li
EF5052 Investments: LN 9
Indexes
Risk-adjusted fund performance

Bonds
Bond Prices
YTM: Yield to maturity
Yield curve
Synthetic Interest Rate Forward
EF5052 Investments
Lecture Notes Set 10
Jay Li
City University of Hong Kong
Jay Li
EF5052 Investments: LN 10
Bonds
Bond Prices
YTM: Yield to maturity
Yield curve
Syntheti

EF5052 - Midterm Formulae
1. Margin requirements
(a) Margin purchase: Actual margin
V alue Loan
V alue
Margin requirements on assets for a margin purchase position in aggregated accounts:
AM =
Margin req. =
Loan
1 MM
(b) Short sale: Actual margin
AM =
SSP

APPENDIX
D
both the TVM and the CF registers.1 To clear the TVM registers on the BA II Plus, press 2nd cfw_CLR TVM. Press 2nd cfw_CLR Work from within the cash flow worksheet to clear the CF registers.
Using the HP-10B and TI BA II Plus Financial Calculat

Department of Economics
University of Minnesota
Intermediate Macroeconomics (ECON 3102)
Keyvan Eslami
Fall 2015
Problem Set 1
Homework must be typed and a hard copy should be
handed in. There will be a 20% penalty if you do not
type it.
1. (10 points) [Wi

SOLUTIONS FOR CHAPTER 8
3.
Here we are finding the YTM of a semiannual coupon bond. The bond price equation is:
P = $1,050 = $32(PVIFAR%,26) + $1,000(PVIFR%,26)
Since we cannot solve the equation directly for R, using a spreadsheet, a financial calculator

Answers to practice problems for Lecture 4
1.
The time line for the cash flows is:
0
10
$5,000
FV
The simple interest per year is:
$5,000 .08 = $400
So, after 10 years, you will have:
$400 10 = $4,000 in interest.
The total balance will be $5,000 + 4,000

FORMULA SHEET
CFFA = OCF NCS NWC,
where OCF = EBIT + depreciation taxes ; NCS = ending NFA - beginning NFA + depreciation
Current Ratio = CA / CL
Quick Ratio = (CA Inventory) / CL
Cash Ratio = Cash / CL
Total Debt Ratio = (TA TE) / TA
Debt/Equity = TD / T

Group Assignment #1
Due date: Lecture 6 (March 3rd, 10am)
(No late submission will be accepted.)
Department of Economics and Finance
EF 5042, Corporate Finance
Semester B, 2014/15, Dr. KIM Ryoonhee
The following questions are based on a case study of Amer

Return and Systematic Risk
CAPM
Does CAPM work in the real world?
EF5052 Investments
Lecture Notes Set 7
Jay Li
City University of Hong Kong
Jay Li
EF5052 Investments: LN 7
Return and Systematic Risk
CAPM
Does CAPM work in the real world?
Outline
1
Return

Returns: computation, averaging etc.
Adjustments: ination and taxes
Risk and return distributions
EF 5052 Investments
Lecture Notes Set 3
Jay Li
City University of Hong Kong
Jay Li
EF 5052 Investments: LN 3
Returns: computation, averaging etc.
Adjustments

Professor Jay Li
EF5052 - Homework 4 - Answers
1. (c) You have to use Sharpe Ratio optimization spreadsheet on the web
page to calculate the weights using either solver or the formula.
The weights are: xM V E = 0.53 and xM V E = 0.47. The spreadsheet
B
C

Homework 5 Solutions
1. Spreadsheet on the web contains the answer to the Size effect problem
1.
E (rP ) = rf + P [ E (rM ) rf ]
.18 = .06 + P [.14 .06] P =
.12
= 1.5
.08
False. = 0 implies E(r) = rf , not zero.
False. Investors require a risk premium onl

EF5052: Investments
Professor Jay Li
Homework 7
Question 1.
Style analysis. Download the file style.xls onto your computer. There are 5 funds in the spreadsheet for which
you will perform style analysis. For part (A) use the worksheet titled "No leverage"