Investment Analysis Exam Paper free essay sample

In the standard deviation and expected return space, the mean-variance combination line is convex while the indifference curve is concave. (c). The variance of portfolio with equal proportions of n assets tends to zero as n ?. (d). For portfolios of many assets, it is not possible to reduce the risk to zero. (e). None of the above. 3. Consider a portfolio of one risky asset and one risk-free asset. Which of the following statements is correct? (a). the correlation between the two assets is not zero. (b). the combination line will be a straight line only if the correlation coef? cient equals -1 or +1. (c). he combination line will be a straight line. (d). the combination line will not be a straight line. (e). none of the above. 4. In the Single Factor Model, you can best measure the contribution that an individual stock makes to the variance of a well diversi? ed portfolio by the stock’s: (a). We will write a custom essay sample on Investment Analysis Exam Paper or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Variance (b). Correlation coef? cient. (c). Residual variance. (d). Systematic risk. (e). None of the above. 2 E(rP ) A ? X Y ? C ? (rP ) Z B? F IGURE 1. The MVS for assets X, Y and Z, where B is the global minimum variance portfolio. Refer to Figure 1 for questions 5-7 5. Which of the following statements is correct? (a). Without short-selling, you can select portfolio A. (b). All the weights of portfolio C are always positive. (c). All the weights of portfolio A must be positive. (d). It must be the case that some short selling is being permitted. (e). None of the above. 6. Rational investors would prefer (a). Portfolio A. (b). Portfolio B. (c). The portfolios represented along the curve starting at B and passing through A. (d). Portfolio located anywhere on the MVS. 7. With short-selling is allowed, (a). Both A and X are ef? cient (b). Both A and C are inef? cient (c). Both A and X are ef? cient (d). Both C and X are inef? ient 8. Which of the following statements is correct? (a). With short-selling, portfolios made up of the minimum variance portfolios will always be on the MVS. (b). The MVS of many assets is bounded. (c). With short-selling, some of the assets must be located on their MVS. (d). Without short-selling, all assets are always located on their MVS. (e). None of the above. 3 9. The following table lists the expected returns and standard deviation of returns for ? ve assets. Assume an investor must invest all of his/her money in one of the assets. Â µi ? i Asset 1 0. 05 0. 25 Asset 2 0. 10 0. 25 Asset 3 0. 5 0. 30 Asset 4 0. 16 0. 45 Asset 5 0. 17 0. 32 Which of the following statements is true? (a). Asset 3 is inef? cient; (b). Asset 1 is ef? cient; (c). A non-satiated, risk-averse investor could possibly choose Asset 4 depending on the parameters of his/her utility function; (d). A non-satiated, risk-averse investor could possibly choose Asset 2 depending on the parameters of his/her utility function; (e). None of the above 10. Under the standard assumptions of the Single Factor Model ri = ? i +? i rm +oi , how many parameters do you need to estimate in order to construct the MVS of 20 risky assets? Assume the expected return and the variance of the market return rm are given. (a). 420. (b). 200. (c). 61. (d). 60. (e). None of the above. 4 PART II Question 1 The following table gives the expected returns and standard deviations of returns for two securities: Â µi ? i Security 1 0. 10 0. 08 Security 2 0. 20 0. 3 Assume correlation ? 1,2 = ? 0. 5. (1). Calculate the expected return and standard deviation of the global MVP, G. (2). Draw the combination line for these two securities and indicate the portfolio G, the ef? cient portfolios and the inef? cient portfolios. (3). Find the weights and standard deviation of the portfolio with an expected return of 25%. Do you need to sell-short? Question 2 Consider a market containing three risky securities. Suppose the vector of expected returns E(r) and the variance-covariance matrix ? and its inverse variance-covariance matrix 1 are given by ? ? ? ? ? ? 100 0 0 0. 01 0 0 0. 1 0. 04 ? 0. 02? , 1 = ? 0 31. 25 12. 5? . E(r) = ? 0. 15? , ? = ? 0 0 12. 5 25 0 ? 0. 02 0. 05 0. 2 (1). Formulate the Markowitz problem for a portfolio of the three risky securities with a target return of 16% and obtain the ? rst order conditions. Note: you are not required to solve the problem. (2). Compute the values of the scalars A, B, C and ?. (3). Find the expected return and standard deviation of the MVP. Find the standard deviations of the two minimum variance portfolios P1 and P2 with E(rP1 ) = 10% and E(rP2 ) = 25%. (4). Draw a rough sketch of the MVS and the asymptotes in the mean-standard deviation space. Your diagram should indicate the positions of P1 , P2 and the MVP. Without short-selling, is it possible to construct an optimal portfolio with an expected return of 25%? Explain why? 5 Question 3 Note: You may use your answers from Question 2 to answer this question. Consider portfolios containing the three risky securities in the previous question (Question 2) together with a risk-free security paying rF = 0. 05. (1) Verify that 1 = I. (2) Find the standard deviations of the two minimum variance portfolios P3 and P4 with E(rP3 ) = 10% and E(rP4 ) = 25%. Find the mean and standard deviation of the tangency portfolio T . (3) Draw a rough sketch to indicate the tangency relation between the MVS with and without the risk-free asset and locate P3 and P4 on the MVS. Are they ef? cient or inef? cient? (4) For the minimum variance portfolios with the expected returns of 10% and 25%, do you bene? from investing in both the risky assets and the risk-free asset in compare with investing in the risky assets only? If so, what are the bene? ts? Question 4 Suppose a single-factor model (SFM) has been ? t to the returns of Stocks A and B as follows: rA = 0. 02 + rM + oA rB = 0. 01 + 0. 8rM + oB . Suppose further that the expected return and standard deviation of the market return is 2 Â µM = 0. 1, ? M = 0. 20, and that the R-square statistics for the two stocks are RA = 0. 8 2 and RB = 0. 9, respectively. Now answer the following questions: (a) What are the total risks and unsystematic risks for the two stocks? b) What is the correlation between the returns of the two stocks?

Notes on Do - 10 Things You Can Do With the Verb Do

Notes on Do - 10 Things You Can Do With the Verb Do Think of the word do as the utility infielder in the game of grammar: it can be called on to play any one of several different positions in a sentence. The Shorter Oxford English Dictionary offers 36 definitions of the verb do (not counting  its uses in countless phrases) and seven definitions of the noun. Both a lexical verb and one of the three primary auxiliaries, do (along with the forms does, did, and done) is the third most frequently used verb in English. As an auxiliary (or helping verb), do is sometimes called an empty verb or a dummy operator because it has no meaning of its own. But do have some respect for this dummy. As well see, do stays busy, and wed have a tough time communicating without it. Idioms and CollocationsAs a lexical verb, do indicates action of some kind and often hooks up with nouns denoting more specific activities. Here are some common do and done expressions: do an about-face, do any good, do as I say, do away with, do blindfolded, do the dishes, do a double take, do homework, do the honors, do in, do a job on, do justice to, do no good, do or die, do out of, do over, do tell, do time, do the trick, do up, do well, do withoutdone deal, done for, done in, done to death, done to a turn, easier said than done, good as done, over and done with, whats done is done, when all is said and doneSubstitutionsDo also functions as a pro-verb, filling in for any number of other verbs. The expressions do so, do it, and do that commonly refer to actions that have previously been identified: If you want to fire me, please do so.I had put off mailing the application and finally decided just to do it.She thought Id left without telling anyone, but I would never do that. All three expressions serve as substitutes for other verbs (in these examples, go, mail, and leave). Do so tends to be a tad more formal than do it and do that. Multiple DosIts not unusual for more than one do to show up in a sentence. How do you do?What do you do for a living?How do you find time to do all that you do? (Without resorting to doo doo jokes or the chorus to Lou Reeds Walk On The Wild Side, see if you can outdo that last example.)Wh- QuestionsIn many questions that begin with a wh- word (who, what, when, where, why, and- oops- how), a form of do comes before the main verb: What do you want?Where did Cheeta put the bananas? When did follows a wh- word, its often contracted to /d/ in informal speech and written as d: Whered Cheeta put the bananas?Yes-No QuestionsWe can fashion a yes-no question by placing a form of do in front of the subject: Do you enjoy listening to lectures?Does anybody know what time it is?Did your sister go out this morning? The use of do in questions is called do-support or do-insertion.NegativesBy adding not (or the contraction nt) to do, does, or did, we can create a negative sentence: Many workaholics do not enjoy their jobs.Casper doesnt believe in ghosts.Nyla didnt like the cold weather. In a negative imperative with the copula be, do not (or dont) appears in front of be: Do not be afraid.Dont be so self conscious. As you can see, present and past endings become part of do and not part of the main verb that follows it. Tag QuestionsA question added to a declarative sentence to check or clarify information is called a tag question. Customarily, a negative declarative takes a positive tag question, while a positive declarative takes a negative tag: You dont trust me, do you?You do miss me, dont you? When theres no auxiliary verb in the main clause, a form of the dummy operator do is used in the tag: Your sister loves to play pranks, doesnt she?EmphasisIn declarative sentences, do, does, and did can be used for emphasis: You do need to be honest with your child.Despite what you think, I did enjoy the play. In speech, emphatic do is usually stressed.ImperativesThe emphatic do can show up at the beginning of an imperative sentence, usually to make it sound less abrupt: Do stop by when youre in the neighborhood. But notice that this do isnt always so friendly: Do shut up, Hyacinth. Truth be told, this version of the emphatic do probably occurs more often in 19th-century novels than in actual conversation s.In some cases, do can also replace the whole imperative: Ill see to it this evening, the lawyer said.Yes, please do, I said. Omissions in Comparative ClausesIn a comparative clause, we can use a form of do to avoid repeating part of the main clause: The Pritchetts work much harder than we do.Gloria drives much faster than Jay does. In these examples, do is considered a stranded operatoran auxiliary that stands alone without a main verb alongside it. Is this the final word on do? Hardly. For one thing, theres the extraordinarily vague do in the Nike slogan  Just do it. For another theres the do in Frank Sinatras scat line Do-be do-be do. Then theres Fred Flintstones memorable  exclamation, Yabba Dabba Do! But before things get too silly, this will simply have to do.