Shares outstanding (St), stock prices (Pt), and Dividends (Dt+1) for assets
A and B are given below. All dividends are paid out at the end of the year,
... [Show More]
12/31/2014. Asset B performed a 3:1 stock split at the beginning of the
1. year, 01/01/2014. What is the value weighted portfolio return?
You purchased 400 shares of Starbucks common stock on margin at
$120 per share. Assume the initial margin is 50% and the maintenance
margin is 30%. Following an earnings warning, the price of Starbucks
starts declining rapidly. At what price do you get a margin call from your
broker? Assume the stock pays no dividends and ignore interest on
There are two possible scenarios for the future, war and peace. The table
below contains the returns of LMT and TIF in each state. Your portfolio has
40% invested in LMT and 60% in TIF. What is the standard deviation of your
3. portfolio return?
A risk parity portfolio is composed of three stocks, A, B, and C. Stock A has
a portfolio weight of 0.5 while stock B’s weight is 0.25. Stock C has a volatility
4. of σC = 0.3. What is the volatility of Stock A?
Using a dataset up to the end of January 2015, you regress the monthly
realized volatility of the S&P 500 on its lagged value, i.e. you run the
5. predictive regression
Consider the CAPM. The risk-free rate is 4 percent. The expected market
rate of return is 10 percent. If you expect stock X with a beta of 1.5 to offer a
6. rate of return of 12 percent, you should:
(20 points) Suppose there are two risky assets that are perfectly correlated (ρ
= 1). Asset A has an expected return of 0.15 and a standard deviation of 0.1.
Asset B has an expected return of 0.1 and a standard deviation of 0.2.
1. Asset B cannot be short-sold.
(20 points) After calculating means, standard deviations, and correlations
from historical data, you estimate that the Goodluck mutual fund (asset G)
has a mean return of 1.0% per month and a standard deviation of 6.40%
You estimate the following regression equation using the same data:
a standard deviation of 9.9% per month. Their estimated correlation is ρ =
per month. The Wellsee fund (asset W) as an estimated mean of 1.2% and [Show Less]