CHAPTER 7: Optimal Risky Portfolios
PROBLEM SETS Solutions
1.
(a) and (e).
2.
(a) and (c). After real estate is added to the portfolio, there are four asset classes
in the portfolio: stocks, bonds, cash and real estate. Portfolio variance now
includes a v
CHAPTER 10: ARBITRAGE PRICING THEORY AND
MULTIFACTOR MODELS OF RISK AND RETURN
PROBLEM SETS
1.
The revised estimate of the expected rate of return on the stock would be the old
estimate plus the sum of the products of the unexpected change in each factor
CHAPTER 26: HEDGE FUNDS
CHAPTER 26: HEDGE FUNDS
PROBLEM SETS
1.
No, a market-neutral hedge fund would not be a good candidate for an investors
entire retirement portfolio because such a fund is not a diversified portfolio. The
term market-neutral refers t
CHAPTER 24: PORTFOLIO PERFORMANCE EVALUATION
CHAPTER 24: PORTFOLIO PERFORMANCE EVALUATION
PROBLEM SETS
1.
As established in the following result from the text, the Sharpe ratio depends on both
alpha for the portfolio ( P ) and the correlation between the
CHAPTER 25: INTERNATIONAL DIVERSIFICATION
PROBLEM SETS
1.
International Investing Raises Questions was published in the Wall Street Journal
in 1997. Some of the arguments presented in the article may no longer be
compelling more than a decade later. For e
Practice Midterm 1 - Answers
1. E. The approximate rate using the equation real rate = nominal rate - inflation rate gives 1.3%
2. A.
3. D.
4. B
5. A
6. A
7. A
8. E
9. A
10. A
11. C
12. A
13. E
14. B
15. A
16. C
17. B
18. C
19. B
20. C
Problem 1.
I paid (
Key to Practice Midterm 2
1. A
2. D
3. B
4. E
5. C
6. E
7. C
8. B
9. D
10. D
11. D
12. C
13. C
14. A
15. C
16. A (457,000,000 - 17,000,000) / 24,300,000 = $18.11
17. A cfw_[$20 * .94 * (1.10 - .015)] - $20 / $20 = 1.99%
18. A
19. D
20. A
Short Answer 1:.
For each of the 4 mutual funds in (1), use the CAPM to evaluate the performance of the fund
manager for the period from January 2000 through December 2004. Based on your findings,
would you recommend buying any of the funds?
Based on the choosing benchmar
Multifactor Models Questions:
For the first set of questions, you will be evaluating the performance of 4 mutual funds. In the second
part, you will be estimating the cost of capital for two firms.
PART A
1. For each of the following determine a benchmark
Chapter 5
PROBLEM SETS Solutions
1.
The Fisher equation predicts that the nominal rate will equal the equilibrium
real rate plus the expected inflation rate. Hence, if the inflation rate
increases from 3% to 5% while there is no change in the real rate, t
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.5034
R Square
0.2534
Adjusted R Square
0.2405
Standard Error
0.0671
Observations
60
ANOVA
df
1
58
59
Intercept
X Variable 1
SS
0.0885
0.2608
0.3494
Coefficients
0.0007
0.9637
Regression
Residual
Total
SE
0
Questions for the Strategic Capital Management Case:
1. What are the costs/benefits of investing in a hedge fund?
2. What is the current stock market valuation of Creative Computers and of Ubid based on the
stock prices as of December 9? Evaluate these va
Questions for DIMENSIONAL FUNDS ADVISORDS Case
Management has thought about investing in Dimensional Funds Advisors but
has a few questions for the Analysts to answer before deciding what to do:
1. What is DFAs business strategy? What do you think of the
CHAPTER 9: THE CAPITAL ASSET PRICING MODEL
PROBLEM SETS
1.
E (rP ) rf P [ E ( rM ) rf ]
.18 .06 P [.14 .06] P
2.
.12
1.5
.08
If the securitys correlation coefficient with the market portfolio doubles (with all
other variables such as variances unchanged
CHAPTER 3: HOW SECURITIES ARE TRADED
CHAPTER3:HOWSECURITIESARETRADED
PROBLEM SETS
a. The stock is purchased for: 300 $40 = $12,000
6.
The amount borrowed is $4,000. Therefore, the investor put up equity, or
margin, of $8,000.
b. If the share price falls t
CHAPTER 4: MUTUAL FUNDS AND
OTHER INVESTMENT COMPANIES
CHAPTER 4: MUTUAL FUNDS AND
OTHER INVESTMENT COMPANIES
PROBLEM SETS
1.
The unit investment trust should have lower operating expenses. Because the
investment trust portfolio is fixed once the trust is
Review for Final Exam
BUS-F420
Professor: Ryan Israelsen
April 27, 2017
Final Exam:
2 hours (though you hopefully wont need that
long)
60 multiple choice
> conceptual (definitions, etc.)
Many should only take a few seconds
Can have TWO 8 x 11 sheet o
Learning About Risk and Return from
the Historical Record
BUS-F420
January 12, 2017
Announcements:
Everybody should have a group (5-8 students)
Please go to Canvas Quizzes and submit
your group members and your case
preferences
Link to eBook is on Canv
Midterm Review - 1
BUS-F420
Professor: Ryan Israelsen
February 9, 2017
Announcements:
Midterm 1 on Tuesday
Bring calculator
Bring a pencil with an eraser for scantron
You can have ONE 8x11 sheet of paper with
formulas, etc., but no laptops, mobile phones,
BUS-F420
Practice Midterm 2
Student: _
1. If you believe in the _ form of the EMH, you believe that stock prices reflect all relevant information
including historical stock prices and current public information about the firm, but not information that is
Practice Final Exam F420 Spring 2017
(Only includes the fixed income section. Refer to other practice midterms for
earlier material)
1. The "modified duration" used by practitioners is equal to the Macaulay duration
A. times the change in interest rate.
B