Strayer University, Washington ACC 557
Week 2: Modeling in High Uncertainty Quiz
1. This question relates to content of Session 1 and is based on the
... [Show More] following example.
Consider a model for describing a random return on Stock C next week, RC. According to this
model, RC can be described using the following 5 scenarios. You can find these data in the
posted file Stock C.xlsx.
What is the expected value of the return on Stock C next week, i.e., what is the value of E[RC]?
Choose the closest from the answers below.
-0.005
0.010
0.015
0.020
0.000
0.005
2. This question relates to content of Session 1 and is based on the following example.
Consider a model for describing a random return on Stock C next week, RC. According to this
model, RC can be described using the following 5 scenarios. You can find these data in the
posted file Stock C.xlsx.
What is the standard deviation of the return on Stock C next week, i.e., what is the value of
SD[RC]? Choose the closest from the answers below.
0.041
0.021
0.051
0.031
0.011
3. This question relates to content of Session 1 and is based on the following example.
Consider a model for describing a random return on Stock C next week, RC. According to this
model, RC can be described using the following 5 scenarios. You can find these data in the
posted file Stock C.xlsx.
What is the probability that the return on Stock C next week is negative? Choose the closest
from the answers below.
0.5
0.4
0.1
0.3
0.2
4. This question relates to content of Sessions 1 and 2 and is based on the following example.
Consider a model for describing random returns on Stocks D and E next week, RD and RE.
According to this model, RD and RE can be described using the following 3 scenarios. You can
find these data in the posted file Stocks DE.xlsx.
Let E[RD] and E[RE] be the expected return values for Stocks D and E next week, respectively,
and let SD[RD] and SD[RE] be the standard deviations of the returns for Stocks D and E next
week, respectively. Which of the following statements is correct?
E(Rd) <= E(Re)and SD (Rd) <= SD(Re)
E(Rd) > E(Re)and SD (Rd) <= SD(Re)
E(Rd) > E(Re)and SD (Rd) <= SD(Re)
E(Rd)<= E(Re)and SD (Rd) > SD(Re)
5. This question relates to content of Sessions 1 and 2 and is based on the following example.
Consider a model for describing random returns on Stocks D and E next week, RD and RE.
According to this model, RD and RE can be described using the following 3 scenarios. You can
find these data in the posted file Stocks DE.xlsx.
What is the value of the correlation coefficient between RD and RE? Choose the closest answer
from the ones presented below.
0.165
1
-1
-0.379
0
-0.165
0.379
6. This question relates to content of Sessions 1 and 2 and is based on the following example.
Consider a model for describing random returns on Stocks D and E next week, RD and RE.
According to this model, RD and RE can be described using the following 3 scenarios. You can
find these data in the posted file Stocks DE.xlsx.
Suppose that a financial company invests $100,000 in the Stock D and $200,000 in the Stock E
now. What is the highest possible value of profit, in $, associated with this investment that
the company can earn next week? Choose the closest answer from the ones presented below.
2000
5000
7000
0
-2000
7. This question relates to content of Sessions 1 and 2 and is based on the following example.
Consider a model for describing random returns on Stocks D and E next week, RD and RE.
According to this model, RD and RE can be described using the following 3 scenarios. You can
find these data in the posted file Stocks DE.xlsx.
Under the investment plan of Q6, what is the expected value of profit, in $, that the company
will earn next week? Choose the closest answer from the ones presented below.
1700
0
2200
2900
3400
8. This question relates to the two-stock example considered in Session 3. In answering these
questions, you can use the Excel file TwoStocks_Solved.xlsx.
Suppose that an investor is considering a portfolio with XA =75,000, XB = 25,000. In other
words, the investor decides to put $75,000 in the Stock A and $25,000 in the Stock B “today”.
What is the expected profit, in $, such a portfolio will earn tomorrow? Choose the closest
answer from the ones presented below.
284
96
159
222
347
9. This question relates to the two-stock example considered in Session 3. In answering these
questions, you can use the Excel file TwoStocks_Solved.xlsx.
What is the value of the standard deviation of profits, in $, for the portfolio considered in Q8?
Choose the closest answer from the ones presented below.
1344
1446
1808
2030
2809
10. This question relates to the two-stock example considered in Session 3. In answering these
questions, you can use the Excel file TwoStocks_Solved.xlsx.
Suppose that an investor would like to split $100,000 between Stocks A and Stock B “today”
so as to maximize the expected profit “tomorrow” irrespective of the standard deviation of
the resulting profit. In other words, suppose that the investor “drops” the constraint on the
maximum allowable value of the standard deviation of profits, while keeping the rest of the
constraints in the portfolio problem. Which of the following choices describes the optimal
portfolio in this case?
Xa = 100,000, Xb = 0
Xa = 50,000, Xb = 50,000
Xa = 25,000, Xb = 75,000
Xa = 75,000, Xb = 25,000
Xa = 0, Xb = 100,000 [Show Less]