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This question was created from Project 1 Copy 3


b. Interest rates fall. They sell the T-Bill, 3 months after purchase to Bertha. She
requires a 6% per annum simple interest rate of return for the remaining time.
Algebraically find the sale price. c. What was the simple interest rate of return per annum that Betty and Bob
achieved? Problem 8: Betty and Bob maintain a portfolio of three stocks, A, B, and C (short
positions are allowed). Each year they adjust the proportions or weightings to reflect what
they hope to accomplish for the portfolio. This year the reward (rate of return) and the
risk - eta are as ner The portfolio return is a weighted average of the returns of A,B, and C. The portfolio Beta is a weighted average of the betas of A, B, and C. Clearly each portfolio characteristic is a linear combination of the characteristics of A, B,
and C. a. Write the information in the table as a system of three linear equations in three unknowns. b. Solve the system by The Row Reduction Method. Be sure to algebraically show
all of your work. Check your solution. c. Interpret your results. If they have $100,000 assigned for use in the portfolio then
what amount of money would be allocated to each stock? Be sure to indicate
whether the stock position is lo_ng or M.

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