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B8306 Fall Professor Xuelin Li Due: Friday, Nov 17 1 Problem Set 4 HOMEWORK INSTRUCTIONS Hand in your homework in a single Excel spreadsheet. Answer each question in a separate worksheet. Write the names of all group members and your group number on the first worksheet of your homework. Turn in homework ON CANVAS BY MIDNIGHT on the due date. Question 1. In this question, we will use the portfolio optimization tools we’ve discussed in class to evaluate the effects of “green” investing. Green investing involves choosing stocks for your portfolio based not only on their risk-return characteristics, but also on the social, environmental and governance standards of the company issuing the stock. 1 Say you have been hired by a university endowment to construct a socially responsible portfolio. This portfolio should overweight socially responsible companies, and underweight socially irresponsible companies. However, the university endowment still would like you to optimize the risk-reward of the portfolio subject to your social responsibility mandate. You decide to construct this portfolio using three indexes: the S&P500 index, a global Energy sector index (which is deemed to represent socially “irresponsible” companies), and the MSCI KLD 400 Social Index (which invests in socially “good” companies, like Microsoft, Facebook, Alphabet, Cisco, and so on; we refer to this as SRI for socially responsible investments). Data for the three indexes is contained in the 1- asset-class-levels.csv spreadsheet on Canvas. The data show the total return from investing in the indexes, assuming dividends are reinvested back into the index. a) Calculate the monthly returns for the three indexes, i.e. 𝑃 𝑡+1 /𝑃 𝑡 . b) Calculate the annualized returns and volatilities for the three indexes. Also calculate the Sharpe ratios for the three indexes assuming an annual risk-free rate of 𝑟 𝑓 = 2.5% . c) Calculate the correlation matrix for index returns. 1 A good reference for this is the recent paper Baker, Bergstresser, Serafeim and Wurgler, 2018, “ Financing the response to climate change: The pricing and ownership of U.S. Green Bonds ,” NBER working paper.

B8306 Fall Professor Xuelin Li Due: Friday, Nov 17 2 d) Find the optimal Sharpe ratio portfolio consisting of these three assets. (Use the average returns, variances and correlations of the three securities, in the same way that we did in class . Make sure that the “Make Unconstrained Variables Non- Negative” checkbox is not chosen – we want to allow negative weights). Does this portfolio seem to satisfy your client’s desire for a “green” investment? (Assume the endowment will invest fully in this portfolio and hold no cash, i.e. there is no need to calculate 𝑤 ∗ in this problem.) e) Now trace out the efficient frontier achievable using these three assets. This is a plot of the minimum volatility for a portfolio that has a given expected return. The volatilities are plotted on the x-axis and the expected returns are plotted on the y-axis. The spreadsheet contains a column of expected returns. For each of these you should go to Solver, and find the minimum volatility portfolio (by choosing 2 weights and setting the third equal to 1 − 𝑤 1 − 𝑤 2 ) that has the given expected return (again, make sure to allow negative weights). In Solver you can add a constraint that sets the cell with the portfolio expected return (which we proxy using the portfolio’s historical average return) equal to the desired expected return, e.g., 4%, 5%, …, 8%, 9%, etc. f) You now choose to modify the original problem to generate a greener answer. To do so, instead of using the securities’ historical average returns, you decide to use modified returns, that express your social preferences. For the SRI portfolio its modified return is set equal to its actual historical annualized return plus 0.25%. For the Energy portfolio, its modified return is set equal to its historical annualized return minus 0.25%. Using these modified returns and the actual portfolio volatility , optimize this portfolio’s modified Sharpe ratio (i.e., its modified annual return minus 𝑟 𝑓 divided by the actual volatility). Is the resultant portfolio more socially responsible than the original one from part (d)? What is this green portfolio’s actual (i.e. , using the historical – not modified – average returns) Sharpe ratio? Where does the portfolio lie relative to the efficient frontier? g) Would you recommend this portfolio to your client? Discuss why or why not. Question 2 . In this question, you will use the monthly return data on the stock market, risk-free T-Bills, and four US industries in the 2-industry-rets.csv file on Canvas. The goal is to test the CAPM’s empirical ability to explain the value-weighted average

B8306 Fall Professor Xuelin Li Due: Friday, Nov 17 3 stock returns for four US industries (food, smoking, toy, and steel) from 1926 through the present day. To do this, you will estimate industries ’ betas and their average excess returns during this period. NOTE: This dataset is available from Ken French’s website at Dartmouth. The industry returns come from his monthly 49 industry portfolio files; and the market return and risk-free rate come from the Fama/French 3 Factors monthly file. a) Compute the monthly excess stock returns for the market and for each of the four industries by subtracting the risk-free returns from each asset ’s raw returns . b) Using Excel’s slope() function, compute the beta of each of the four industries using the entire data sample, based on the monthly excess returns of the stocks and the market computed in (a). Check that the beta estimates align with economic intuition. c) Compute the annualized average excess stock returns for each of the four industries and for the market for the entire period. d) If the market’s average excess return over the entire data sample is a good estimate of its expected excess return and the CAPM is correct, what should the slope of the security market line (SML) be? e) U sing Excel’s slope function, compute the slope of a line of best fit that summarizes the relationship between the four industries average excess returns (the y-axis) and their betas (the x-axis) in this period. Do the industries with higher betas experience higher average returns? How does the slope of this relationship compare to your answer to (d)? f) Compute each of the four industries’ alphas using the entire data sample. [Again, assume that the market’s average excess return in the period is a good estimate of its expected excess return.] What does the CAPM predict that these four alphas should be? Which industries perform better or worse than the CAPM predicts? g) Plot the CAPM’s predicted SML for the period . [The SML when done with excess returns starts at the origin and increases as a function of securities ’ betas with a

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B8306 Fall Professor Xuelin Li Due: Friday, Nov 17 4 slope given by the market’s excess return. ] Assets’ expected ( which we’ll estimate as the average for the period) excess returns should be on the y -axis and assets’ betas should be on the x -axis. Add four points for the four industries to your plot. How should we interpret the vertical distance between each of the four points and the SML? h) Compute the annualized Sharpe ratios for each of the four industries and the market during the period. [You will need to use annualized returns and annualized volatility.] Which of these five assets has the highest Sharpe ratio? Is this consistent with the CAPM’s prediction? i) Would it have been possible during this period to use any of the industries in this analysis to construct an overall portfolio that had a higher Sharpe ratio than the market? Be sure to reconcile this answer with your answer to part (h).

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* CengageNOWv2 | On x * Cengage Learning B Milestone Two Guidel G module 5 problem set x blem Set: Mod x now.com/ilm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogres.. eBook Show Me How Proceeds from Notes Payable On January 26, Bella Co. borrowed cash from Conrad Bank by issuing a 30-day note with a face amount of $48,000. Assume a 360-day year. a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%. b. Determine the proceeds of the note, assuming the note is discounted at 6%. Check My Work The proceeds equal the cash initially received. Proceeds represents how much in value the borrower is walking away with in cash on merchandise. Previous Next Check My Work 1:36 PM 54°F A O E A 4 11/28/2021 %23

6.2 Saving and Investing n.hawkeslearning.com/Portal/Lesson/lesson_practice# niversity X Question 9 of 13, Step 1 of 1 X - Save & Exit Practice Lesson: 6.2 Saving and Investing Lesson 6.2 Saving and Investin X Answer How to enter your answer (opens in new window) Ⓒ2024 Hawkes Learning $350 Your answer is incorrect. Please choose one of the following: Google Chrome - The Fast & Sex 3/13 Correct Lateral Flexion: What Is It and Molly starts an IRA (Individual Retirement Account) at the age of 28 to save for retirement. She deposits $350 each month. The IRA has an average annual interest rate of 7% compounded monthly. How much money will she have saved when she retires at the age of 65? Round your answer to the nearest cent, if necessary. X + GRANT GREENE Explain Error 5 Incorrect Formulas Keypad Keyboard Shortcuts Try Again

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9 Concept 1: Competition & Dep x 9 16.4 Savings plan homework u x Login - Powered by Skyward 9 Paired Selections - STAAR Prep x A my.hrw.comAwwtb/api/viewer.pl O Personal Math Trainer Lesson 16.4 - Homework-Homework 3 6 7 Round your answers to two decimal places, if necessary. At the beginning of each of the last three years, Lucas put $7,000 from his earnings as a waiter into a college savings account that earned 1.7% interest compounded annually. Now he will spend an estimated $21,600 to attend his local community college for 2 years and not take out a student loan. Complete the table to determine whether Lucas has saved enough money to attend community college. 2 3 Year 1 Beginning balance $0 Amount deposited $7,000 $7,000 $7,000 New balance $7,000 $ Amount of interest earneds Ending balance $ Lucas (select) v enough money to attend community college. v Check Answer Ne Question 5 of 8 P Search ILLUCH

8✓ Homework Ch1 1. BE.01.01 2. BE.01.01.ALGO 3. BE.01.02 CengageNOWv2 | Online teachin X b Success Confirmation of Question X + 4. BE.01.02.ALGO 5. BE.01.03 6. BE.01.04 BE.01.04.ALGO 8. BE.01.04.BLANKSHEET.AL... 9. BE.01.05 10. BE.01.06 11. BE.01.06.ALGO 12. BE.01.07 13. EX. 01.05.ALGO 14. EX.01.06.ALGO 15. PR.01.05A.BLANKSHEET 16. EX.01.01 Progress: 7/20 items Assignment Score: 48.58% 86°F Mostly cloudy https://v2.cengagenow.com/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSession Locator=&inpro... A Submit Assignment for Grading x 4:48 PM 3 8/30/2022

Eat min C e New tab Λ Content xW Quiz 3-MAT-143, section 03F, Fa X + Q A ✩ https://www.webassign.net/web/Student/Assignment-Responses/last?dep=34832472 Viewing Saved Work Revert to Last Response DETAILS MY NOTES You deposit $850 in an account paying an annual simple interest rate of 7.8%. Find the future value of the investment (in dollars) after 1 year. DETAILS MY NOTES Calculate the simple interest due (in dollars) on a 40-day loan of $1,600 if the annual interest rate is 9%. (Use 360 days in 1 year.) $ DETAILS MY NOTES

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History Bookmarks Profiles Tab Window Help M Question 2 - Ch 21: Homewor × D2L Classlist - Spring 2024 Intro × New Tab .edu/webwork2/MATH_107_online_Spring_2024/HW_20_Simple_and_Compound_Interest/14 MAA MATHEMATICAL ASSOCIATION OF AMERICA / HW 20 Simple and Compound Interest / 14 Previous Problem Problem List Next Problem HW 20 Simple and Compound Interest: Problem 14 (6 points) What are the effective annual rates for an account paying an annual interest rate of 6% which is compounded: (a) annually? (b) quarterly? % % (c) daily (assuming there are 365 days in the year)? % (d) continuously? % Note: You can earn partial credit on this problem. Preview My Answers Submit Answers You have attempted this problem 0 times. You have unlimited attempts remaining. Page generated at 05/04/2024 at 02:41pm EDT WeBWorK 1996-2022 | theme: math4-green | ww_version: 2.17 | pg_version 2.17 | The WeBW

S Math Models B A wbbroncos.schoolsplp.com/enrollments/156569804/items/YU132/work?prev=LNSDS Classes * Western Brown Loc. A Planner - ProgressB. S Desmos | Graphing. A ALEKS - Gracie Glov. M My Classes | McGra. Gracie Glover Math Models B: Lesson 1 - Salary Next Activity > Cont ↑ Cour v Unit Target due: 1/14/21 58.33% 7) Choose the best answer. What is the gross annual pay for Saul if he works 40 hours each week but also works 4 hours of overtime every two weeks? (Saul makes $27.35 an hour and gets time and a half for overtime.) $61,154.60 O $57,052.10 NIT AM O $4,266.60 OH uis $65.421.20 O $56,888 O D 8) Choose the best answer. Caleb has worked hard and is offered a salaried position with the same company. He is offered $28,000, but will be expected to work 44 hours per week with no overtime pay. How much would he be paid per year if he remained in his present job and

Learning SE MINDTAP evo/index.html?deploymentid=60338517901669990751687760&elSBN=9780357517642&nbld=3626933&snap... ☆ lomework 6300. 1 mancial Lailuialvi vi a spicoubnicel. Hide Feedback Correct X f6 Quantitative Problem 1: You plan to deposit $2,200 per year for 6 years into a money market account with an annual return of 2%. You plan to make your first deposit one year from today. a. What amount will be in your account at the end of 6 years? Do not round intermediate calculations. Round your answer to the nearest cent. 4 b. Assume that your deposits will begin today. What amount will be in your account after 6 years? Do not round intermediate calculations. Round your answer to the nearest cent. 6 Hide Feedback Incorrect F Check My Work Feedback Review the FVAN definition and its equation. Q Search Understand the difference between an ordinary annuity and an annuity due. Be careful about the order of mathematical operations if using the equation. If using a financial calculator, be…

E Chapter 5 Homework - FINANCIA X O NWP Assessment Player UI Appli X b Answered: The accountant of Lati x M Inbox - dhyani11141999@gmail. X b My Questions | bartleby + i assessment.education.wiley.com/was/ui/v2/assessment-player/index.html?launchld=1d52287e-dfd8-4d2a-80c9-4cbf51a01297#/question/5 E Chapter 5 Homework Question 6 of 6 > -/ 1 View Policies Current Attempt in Progress The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of the year 2020 are as follows. CONSTANTINE CAVAMANLIS INC. BALANCE SHEETS Dec. 31, 2020 Jan. 1, 2020 Inc./Dec. Assets Cash $ 45,000 $ 13,000 $32,000 Inc. Accounts receivable 91,000 88,000 3,000 Inc. Equipment 39,000 22,000 17,000 Inc. Less: Accumulated Depreciation-Equipment 17,000 11,000 6,000 Inc. Total $158,000 $112,000 Liabilities and Stockholders' Equity, Accounts payable $ 20,000 $ 15,000 5,000 Inc. Common stock 100,000 80,000 20,000 Inc. Retained earnings 38,000 17,000 21,000 Inc. Total $158,000 $112,000 Net…

FMfcgxwLsmmztLTTFHnxfgtfwHRqwdvc?projector=18&messagePartld=0.3 Homework Assignment #3 Due in drop box 4/8 by 11:59 p.m. Chapter 6 2. John Walters is comparing the cost of credit to the cash price of an item. If John makes an $80 down payment and pays $35 a month for 24 months, how much more will that amount be than the cash price of $685? 5. A work-at-home opportunity is available in which you will receive 3 percent of the sales for customers you refer to the company. The cost of your "franchise fee" is $600. How much would your customers have to buy to cover the cost of this fee? Chapter 7 7. Which mortgage would result in higher total payments? Mortgage A: $985 a month for 30 years Mortgage B: $780 a month for 5 years and $1,056 for 25 years end F12 home prt sc F10 F6 F7 F8 F9 F11 F3 F4 F5 %23 % 5 6 7 8 9

= Homework: Homework 3 Using the simple interest formula, determine the number of days until $1256.00 will earn $22.14 interest at 8-% p.a. The number of days required is (Round up the final answer to the nearest day as needed. Round all intermediate values to six decimal places as needed.)

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E Chapter 5 Homework - FINANCIA X O NWP Assessment Player UI Appli X b Answered: The accountant of Lati x M Inbox - dhyani11141999@gmail. X b My Questions | bartleby + i assessment.education.wiley.com/was/ui/v2/assessment-player/index.html?launchld3D1d52287e-dfd8-4d2a-80c9-4cbf51a01297#/question/0 E Chapter 5 Homework Question 1 of 6 > -/ 1 View Policies Current Attempt in Progress Koch Corporation's adjusted trial balance contained the following asset accounts at December 31, 2020: Cash $7,000, Land $40,000, Patents $12,500, Accounts Receivable $90,000, Prepaid Insurance $5,200, Inventory $30,000, Allowance for Doubtful Accounts $4,000, and Equity Investments (to be sold in the next quarter) $11,000. Prepare the current assets section of the balance sheet. (List Current Assets in order of liquidity.) КОСН СORPORATION Balance Sheet (Partial) 2$ 2$ 1:37 PM O Type here to search 9/24/2020 2 ..

blem Set: ModX * CengageNOWv2 | On x * Cengage Learning B Milestone Two Guidel x G module 5 problem set X ow.com/ilm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=. Lo еВook Show Me How Entries for notes payable Bennett Enterprises issues a $660,000, 45-day, 9%, note to Spectrum Industries for merchandise inventory. Assume a 360-day year. If required, round your answers to the nearest dollar.If an amount box does not require an entry, leave it blank. a. Journalize Bennett Enterprises' entries to record: 1. the issuance of the note. 2. the payment of the note at maturity. 2 b. Journalize Spectrum Industries' entries to record: 1. the receipt of the note. 2. the receipt of the payment of the note at maturity. Previous Check My Work 56°F Mostly cloudy ヘ回。

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B Milestone Two Guidel x G module 5 problem set n Set: Mod x * CengageNOWv2 | Onl x Cengage Learning .com/ilm/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSessionLocator=&inprogres... Proceeds from Notes Payable On January 26, Bella Co. borrowed cash from Conrad Bank by issuing a 30-day note with a face amount of $48,000. Assume a 360-day year. a. Determine the proceeds of the note, assuming the note carries an interest rate of 6%. b. Determine the proceeds of the note, assuming the note is discounted at 6%. Check My Work Previous Next All work saved. Email Instructor Save and Exit Submit Assignment for Grading 2:58 PM 56°F 11/28/2021

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History Bookmarks Window Help Fri Feb 5 く> A mathxl.com Post- Chapter 2 Homework P Do Homework - Post- Chapter 2 Homework 201 Sec04 (Spring2021) Brionna Washington & omework: Post- Chapter 2 Homework Save re: 0 of 58 pts 15 of 15 (14 complete) v HW Score: 42%, 42 of 100 pts -61A (similar to) Question Help ▼ ring the first month of operations, Johnson Services, Ic., completed the following transactions: (Click the icon.to view the transaction data.) ead the requirements. More Info s. Exclude explanations from journal entries.) Lequirement 1. Record each transaction in the Mar 2: Johnson Services received $62,000 cash Mar 2 Johnson Services received $62,000 cash and issued common stock to the Journal stockholders. Accounts 3 Purchased supplies, $600, and equipment, $11,400 on account. Date 4 Performed services for a customer and received cash, $5,500. 7 Paid cash to acquire land, $38,000. Mar 11 Performed services for a customer and billed the customer, $4,300. Johnson expects to collect…

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