Answers Risk Aversion and Security - 1297 Words

------------------------------------------------- Assignment 7 The due date for this quiz is Mon 26 Aug 2013 6:00 AM PDT (UTC -0700). ------------------------------------------------- Top of Form Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all dollars without decimals and all interest rates in percentage with up to two decimals. Read the syllabus for examples.The points for each question are listed in parentheses at the start of the question, and the total points for the entire assignment adds up to 100. This assignment covers Statistics as related to finance. Refer to Note on Review of Statistics before†¦show more content†¦For two otherwise identical corporate bonds, the one with more idiosyncratic risk should have a price that is Higher. The same. Lower. Answer: Higher Question 8 (15 points) Suppose your client is risk-averse but can invest in only one of the three securities, X, Y, or Z, in an uncertain world characterized as follows. Next year the economy will be in an expansion, normal, or recession state with probabilities 0.40, 0.40, and 0.20, respectively. The returns (%) on the three securities in these states are as follows: Security X {expansion = +14, normal = +10, recession = +7}; Security Y {+11, +9, +8}; Security Z {+13, +8, +7.5}. Which security can you rule out, that is, you will not advise your client to invest in it? None of the securities. Security X. Security Y. Security Z. Answer: Security Y Question 9 (15 points) You have just taken over as a fund manager at a brokerage firm. Your assistant, Thomas, is briefing you on the current portfolio and states We have too much of our portfolio in Alpha. We shouldShow MoreRelatedAnswers: Risk Aversion and Security1285 Words   |  6 Pages------------------------------------------------- Assignment 7 The  due date  for this quiz is  Mon 26 Aug 2013 6:00 AM PDT (UTC -0700). ------------------------------------------------- Top of Form Please read all questions and instructions carefully. Note that you only need to enter answers in terms of numbers and without any symbols (including $, %, commas, etc.). Enter all dollars without decimals and all interest rates in percentage with up to two decimals. Read the syllabus for examples.The points for each question are listed inRead MoreIii. Methodology. Data And Sample Specifications. In Order1494 Words   |  6 Pagesis available for each respondent which I will use to group individuals by their current residence in East or West Berlin. The data is available at a cost for undergraduate research with an appropriate security concept; I have started working on obtaining the data. In GSOEP, the participants answer demographic, labor, life satisfaction, personality-related and other supplemental questions. While some questions are asked every year, others only appear once or several times. Because of this, I willRead MorePortfolio Management: Practice Problems1301 Words    |  6 PagesWhat will be the smallest compensatory risk premium the company has to offer? 3. Suppose now the utility function is U=E(r)-0.5A 2. (Inputs should be in a decimal format.) The company still charges the entry fee $145 for the game. For an investor with A=0.75, will the investor prefer this coin game to an instant risk-free rate of 1%? Part II. Construction of Feasible Investment Opportunity Set and the Efficient Frontier (Lecture 3) 1. Consider two securities for the potential portfolio inclusion:Read MoreThe Results Of The Study Showed There Was No Effect On872 Words   |  4 PagesThe results of the study showed there was no effect on debt account aversion, F(3, 358) - .41, ns. There was an insignificant trend for anxious people making less optimal decisions in comparison to the other three groups. (Results for debt account aversion) There was also no effect on financial literacy, Pearson chi-square (3) = 6.09, ns. There was an insignificant trend with incorrect answers when thinking about romantic relationships and all three primes had lower rates than the controlRead MoreA Survey of Behavioral Finance Summary1332 Words   |  6 Pageswhen the some of the princibles are loosen up. This essay also discusses about two main topics; limits to arbitrage and psychology. These two topics are known as the two buildings blocks of the behaviour finance. In the normal markets security prices equal to fundamental value.In this sitiuation. expected cash flows can be easily calculate with the markets’ discount rates. This hypothesis called Efficient Market Hypothesis.According to this hypothesis; as soon as there will be a deviationRead MoreA Survey of Behavioral Finance Summary1322 Words   |  6 Pagesfacts when the some of the princibles are loosen up. This essay also discusses about two main topics; limits to arbitrage and psychology. These two topics are known as the two buildings blocks of the behaviour finance. In the normal markets security prices equal to fundamental value.In this sitiuation. expected cash flows can be easily calculate with the markets’ discount rates. This hypothesis called Efficient Market Hypothesis.According to this hypothesis; as soon as there will be a deviationRead MoreFilmore Enterprises Essay examples1416 Words   |  6 Pagesis relatively higher, then the company will have higher risk. Judging from table1 in the attachment, CPC with higher rate of return(9.70%) has higher beta coefficient(1.53%), which means it might be the most profitable one, but the risk is high, while MORELY has the lowest rate of return(5.70%)with the risk of -0.77% (it’s riskless). As for EAT, the rate of return is a little lower than CPC, but still very high, so it might also has high risk. 2. a. T-bill return is independent of the state ofRead MoreAssign71394 Words   |  6 Pagesface a variety of risks in holding its shares. If the economy falters, people tend to travel less and so there is less demand from the airlines industry for Exxons fuels. This type of risk that Exxons shareholders bear is Your Answer Score Explanation specific/idiosyncratic risk. systematic/market risk. Correct 5.00 Correct. Total 5.00 / 5.00 Question Explanation A fundamental question about different types of risks. Question 2 (5 points) Suppose there are three securities (A, B, and C) toRead MoreThe Performance Of Portfolio Theory1521 Words   |  7 Pagesinvestment process. Some research papers have concluded several key points via using modern portfolio theory and we used them in this simulation as well. To be brief, this theory focus on how the risk-averse investor could form a portfolio to optimize their expected return given specific level of risk. According to the simulation system, however, it is not possible to use it completely as it released its own news per year. Hence, we combined both theories and news to construct a portfolio for eachRead MoreFinance Chapter 8 Interative Problem1082 Words   |  5 Pagesthat includes a market-weighted fraction of all publicly traded stocks; by investing in that fund, you can obtain average stock market results. Given the situation as described, answer the following questions. a. (1) Why is the risk-free return independent of the state of the economy? Do T-bills promise a completely risk-free return? (2) Why are High Tech’s returns expected to move with the economy whereas Collections’ are expected to move counter to the economy? b. Calculate the expected rate of