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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?Which of the following denotes the duration till which the investor has to wait for the break even? Options:- Profitability period - Wait time- Payback Period- Net Present Value
- 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 exampleConsider the three calls from the previous problem expiring in T = 1 year. Suppose that the premium of the three options are $7, $3, $1 for A, B, and C, respectively, today (time 0). Suppose the price on the stock today is $14. Suppose the risk-free rate is constant at 5%. Graph the profit function for the butterfly strategy at time T taking into consideration the time value of the initial cost. By how much would the asset have to change over the year for your butterfly portfolio to be a loss?
- Heer Don't upload any image pleaseSuppose 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?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?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.