From agehr at mozart.depaul.edu Sat Feb 1 19:58:16 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problem answers Message-ID: Here are the answers to the text problems. 21) We can construct a mix of A and F with a beta equal to 2/3 if we have a portfolio containing 2/3 A and 1/3 F. The expected return on this portfolio would be: 10x2/3 + 4x1/3 = 8%. We could buy E and sell the mix of 2/3 A and 1/3 F and earn 1% of the amount bought and sold as pure profit. 22) There are a lot of possibilities all involving selling A and B and buying C. e.g. buy C and sell a portfolio of 50% A and 50% B. or 1/3 A and 2/3 B will yield profits in all states. A rise in price of C to about $50.50 will eliminate the arbitrage profits in the latter case. 23) If the economy is in APT equilibrium then 14 = rf + 1.0xK 14.8 = rf + 1.1xK Where rf is the risk-free rate and K is the market price of risk. Solving, K=8 and rf=6, so the risk-free rate must be 6. From lsmith1 at depaul.edu Mon Feb 3 10:22:15 2003 From: lsmith1 at depaul.edu (Leslie Smith) Date: Wed Apr 16 16:11:37 2003 Subject: tesi Message-ID: tesi -------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030203/bc79de6b/attachment.htm From aveina2 at hotmail.com Wed Feb 12 13:42:38 2003 From: aveina2 at hotmail.com (Laura Gonzalez) Date: Wed Apr 16 16:11:37 2003 Subject: Quiz Today? Message-ID: An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030212/964d99cb/attachment.htm From agehr at mozart.depaul.edu Fri Feb 14 12:03:06 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problems Message-ID: Here are some suggested problems from Chapter 19. I'll provide the answers in a subsequent e-mail. 4 9 10 a. From agehr at mozart.depaul.edu Fri Feb 14 13:13:38 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to problems Message-ID: 4)a) Alpha for A is: 0.2 Alpha for B is: -1.0 As part of a larger portfolio you would prefer A. b) Sharpe ratio for A is: 0.5 Sharpe ratio for B is: 0.26 A would again be preferred even if it's just held by itself with the risk-free security. 9) The manager's alpha is zero. 10 a) Alpha for A is 3% Alpha for B is 4.5% Treynor ratio for A is 12 Treynor ratio for B is 12 Both have positive Alphas and outperform the market. From agehr at mozart.depaul.edu Fri Feb 21 15:26:59 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problems Message-ID: I put a couple more problems on performance evaluation at: http://mozart.depaul.edu/~agehr/probs.html From aveina2 at hotmail.com Wed Feb 26 13:02:59 2003 From: aveina2 at hotmail.com (Laura Gonzalez) Date: Wed Apr 16 16:11:37 2003 Subject: homework Message-ID: An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030226/ef8a0b2a/attachment.htm From agehr at mozart.depaul.edu Thu Feb 27 12:11:22 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: homework In-Reply-To: Message-ID: (18/23)x14 +(5/23)x3-12 = -0.39 On Wed, 26 Feb 2003, Laura Gonzalez wrote: > If someone wouldn't mind could they show me how they got the -0.39% > answer for number 1.  My answer is off, and I am not sure what i am doing > wrong. >   > Thank you in advance > Laura Gonzalez > > ________________________________________________________________________________ > > Add photos to your e-mail with MSN 8. Get 2 months FREE*. > From agehr at mozart.depaul.edu Sat Feb 1 19:58:16 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problem answers Message-ID: Here are the answers to the text problems. 21) We can construct a mix of A and F with a beta equal to 2/3 if we have a portfolio containing 2/3 A and 1/3 F. The expected return on this portfolio would be: 10x2/3 + 4x1/3 = 8%. We could buy E and sell the mix of 2/3 A and 1/3 F and earn 1% of the amount bought and sold as pure profit. 22) There are a lot of possibilities all involving selling A and B and buying C. e.g. buy C and sell a portfolio of 50% A and 50% B. or 1/3 A and 2/3 B will yield profits in all states. A rise in price of C to about $50.50 will eliminate the arbitrage profits in the latter case. 23) If the economy is in APT equilibrium then 14 = rf + 1.0xK 14.8 = rf + 1.1xK Where rf is the risk-free rate and K is the market price of risk. Solving, K=8 and rf=6, so the risk-free rate must be 6. From lsmith1 at depaul.edu Mon Feb 3 10:22:15 2003 From: lsmith1 at depaul.edu (Leslie Smith) Date: Wed Apr 16 16:11:37 2003 Subject: tesi Message-ID: tesi -------------- next part -------------- An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030203/bc79de6b/attachment-0001.htm From aveina2 at hotmail.com Wed Feb 12 13:42:38 2003 From: aveina2 at hotmail.com (Laura Gonzalez) Date: Wed Apr 16 16:11:37 2003 Subject: Quiz Today? Message-ID: An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030212/964d99cb/attachment-0001.htm From agehr at mozart.depaul.edu Fri Feb 14 12:03:06 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problems Message-ID: Here are some suggested problems from Chapter 19. I'll provide the answers in a subsequent e-mail. 4 9 10 a. From agehr at mozart.depaul.edu Fri Feb 14 13:13:38 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Answers to problems Message-ID: 4)a) Alpha for A is: 0.2 Alpha for B is: -1.0 As part of a larger portfolio you would prefer A. b) Sharpe ratio for A is: 0.5 Sharpe ratio for B is: 0.26 A would again be preferred even if it's just held by itself with the risk-free security. 9) The manager's alpha is zero. 10 a) Alpha for A is 3% Alpha for B is 4.5% Treynor ratio for A is 12 Treynor ratio for B is 12 Both have positive Alphas and outperform the market. From agehr at mozart.depaul.edu Fri Feb 21 15:26:59 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: Problems Message-ID: I put a couple more problems on performance evaluation at: http://mozart.depaul.edu/~agehr/probs.html From aveina2 at hotmail.com Wed Feb 26 13:02:59 2003 From: aveina2 at hotmail.com (Laura Gonzalez) Date: Wed Apr 16 16:11:37 2003 Subject: homework Message-ID: An HTML attachment was scrubbed... URL: http://mailman.depaul.edu/pipermail/fin335/attachments/20030226/ef8a0b2a/attachment-0001.htm From agehr at mozart.depaul.edu Thu Feb 27 12:11:22 2003 From: agehr at mozart.depaul.edu (Adam Gehr) Date: Wed Apr 16 16:11:37 2003 Subject: homework In-Reply-To: Message-ID: (18/23)x14 +(5/23)x3-12 = -0.39 On Wed, 26 Feb 2003, Laura Gonzalez wrote: > If someone wouldn't mind could they show me how they got the -0.39% > answer for number 1.  My answer is off, and I am not sure what i am doing > wrong. >   > Thank you in advance > Laura Gonzalez > > ________________________________________________________________________________ > > Add photos to your e-mail with MSN 8. Get 2 months FREE*. >