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- 1 Given the following historical prices calculate a distribution of possible prices for the next time period: Time 1 Price 2 80 3 4 5 6. 7 8 10 11 50 100 60 20 30 40 60 40 30 50 What is the 85% VaR? What is the 85% expected Shortfall? Using an exponentially weighted moving average with lambda=0.5 calculate and estimate of the volatility at the current time.hi could you please help solve exercise 5.24?If intrest rates change from i to i' after the inital period. What is the initial value of the consol and what is the yield from selling it after one period?
- A project has a 0.68 chance of doubling your investment in a year and a 0.32 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment?How can you use zero-coupon yields to calculate implied one-year forward rates? Give an exampleSuppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places.) What is the standard deviation?
- It is given that dP/dt = rP (r being the annually compounded interest rate and P is the amount in the account at any given time). Suppose that an account earns at an annual rate of r percent compounded continuously and a person is drawing an income of H dollars per year withdrawn continuously (impossible, but a modeling assumption). Use phase line analysis to analyze the behavior of the account. Discuss the meaning of any equilibrium points and their stability. If r = 10% (a reasonable rate for long-term stock investments), and H = $10,000, how long should an initial investment of $50,000 be left untouched so that when withdrawals begin the capital is not depleted?Consider a security with a beta of 1.2, when the market risk premium is 5%, and the risk-free rate is 2%. After researching this security, you think that you would get a return of 10% if you bought this security and held it for one year. Is the security that you are considering over-priced or under-priced? Explain your answer.Suppose the SML has a risk-free rate of 5% and an expected market return of 15%. Now suppose that the SML shifts, changing slope, so that kRF is still 5% but kM is now 16%. What does this shift suggest about investors’ risk aversion? If the slope were to change downward, what would that suggest?
- A project has a 0.92 chance of doubling your investment in a year and a 0.08 chance of halving your investment in a year. What is the standard deviation of the rate of return on this investment? (Do not round intermediate calculations. Round your answer to 2 decimal places.)Assume that you are given the following historical returns for the Market and Security J. Also assume that the expected risk-free rate for the coming year is 4.0 percent, while the expected market risk premium is 15.0 percent. Given this information, determine the required rate of return for Security J for the coming year, using CAPM. Year 1 2 O21.20% 3 4 5 6 O22.34% O 23.49% O24.63% O24.10% Market 10.00% 12.00% 16.00% 14.00% 12.00% 10.00% Security J 12.00% 14.00% 18.00% 22.00% 18.00% 14.00%If you are promised a nominal return of 16%, on a one-year investment, and you expect the rate of inflation to be 2%, what real rate do you expect to earn? Use the Fisher equation, NOT the approximation.