Please do question 1f and 1g handwritten 1. You are trying to plan your investments for the next year. You havedecided that the market will either be strong (a bull market), weak (abear market) or normal. You think that stocks, bonds, and bills will earnthe following returns in these scenarios:ScenarioBull marketNormal marketBear marketProbability Stock0.200.550.25BondReturn Return0.250.10-0.150.060.030.02BillReturn0.030.030.03You have also decided that you have a risk-aversion (A) of 8.(a) What is the expected return for each of the securities?(b) What is the volatility of each security return?(c) What is the covariance between stock and bond returns?(d) If you combine stocks and bills as an investment, what is your op-timal combination? What is your expected return? What is yourportfolio's volatility?(e) If you combine bonds and bills, what is your optimal combination?What is your expected return? What is your portfolio's volatility?(f) If you combine stocks and bonds, what is your optimal combination?What is your expected return? What is your portfolio's volatility?|(g) If you combine all three assets in your portfolio, what is your op-timal combination? What is your expected return? What is yourportfolio's volatility?

Solution: From the given information,

Answered: You are trying to plan your investments…

MATLAB: An Introduction with Applications

6th Edition

ISBN:9781119256830

Author:Amos Gilat

Publisher:Amos Gilat

Chapter1: Starting With Matlab

Section: Chapter Questions

Problem 1P

See similar textbooks

Similar questions

3. A hedge fund has two trading desks (A and B ) which have different traders with different trading strategies. The hedge fund has up to $10 million in total which it can allocate to the two desks for them to start investing. However, it can only allocate at most $7 million to each desk to follow the diversification information given to investors. After 1 year, it is expected that desk A will make a 5% return (i.e. for every $1 in initial funding it will end with $1.05 for a profit of $0.05) and desk B will make a 10% return. However, for every $1 million in initial funding, desk A requires 3 support staff (for trade execution, risk management, IT, etc) and desk B requires 5 support staff. There are only 40 support staff available. (a) Formulate an LP problem to determine how the fund should best allocate its initial funding to maximise the profit in the first year. (b) Solve the hedge fund's problem using the simplex method. (c) By considering the optimum of the dual problem,…
It’s September 2017. You are an oil distributor, planning to buy 350,000 barrels of crude oil from British Petroleum (BP) in February 2018 in exchange for a spot price prevailing at that time. Because February 2018 spot price is unknown today, your objective is to hedge this risk. The futures price of crude oil for February 2018 delivery is $75.40. Contract size for crude oil is 1000 barrels. Assume that there is no excessive volatility during delivery month. (a) If you were to hedge using futures market, would you enter short or long futures position in September 2017? Explain. (b) What contracts and how many contracts do you need? (c) Calculate total profit or loss on your futures position, if at the futures contract’s maturity in February 2018 spot price turns out to be $65.00 a barrel.
Nicholas Grammas is an investment analyst examining the performance of two mutual funds with Janus Capital Group: the Janus Balanced Fund and the Janus Overseas Fund. The Janus Balanced Fund (JANBX): This “core” fund consists of stocks and bonds and its goal is diversification. It has historically produced solid long-term returns through different market cycles. The Janus Overseas Fund (JAOSX): This fund invests in overseas companies based on their individual merits instead of their geography or industry sector. The following table reports a portion of the annual returns (in percent) for these two funds from 2000–2016. Year. Balanced. Overseas 2000 -2.16 -18.57 2001 -5.04 -23.11 2002 -6.56 -23.89 2003 13.74 36.79 2004 8.71 18.58 2005 7.75 32.39 2006 10.56 47.21 2007 10.15 27.76 2008 -15.22 -52.75 2009 24.28 78.12 2010 7.83 19.28…
You do not need a lot of money to invest in a mutual fund. However, if you decide to put some money into an investment, you are usually advised to leave it in for (at least) several years. Why? Because good years tend to cancel out bad years, giving you a better overall return with less risk. To see what we mean, let's use a 3-year moving average on the Calvert Social Balanced Fund (a socially responsible fund). Year 1 2 3 4 5 6 7 8 9 10 11 % Return 1.78 17.79 7.46 5.95 −4.74 25.85 9.03 18.92 17.49 6.80 −2.38 (a) Use a calculator with mean and standard deviation keys to find the mean and standard deviation of the annual return for all 11 years. (Round your answers to two decimal places.) x = % s = % (b) To compute a 3-year moving average for 1992, we take the data values for year 3 and the prior 2 years and average them. To compute a 3-year moving average for year 4, we take the data values for year 4 and the prior 2 years and average them. Verify that the…
Duffin House, Higgins Press, and Sickle Publications all went public on the same day recently. John O'Hagan had the opportunity to participate in all three initial public offerings (partly because he and Marjory Duffin are good friends). He made a considerable profit when he sold all of the stock 2 days later on the open market. The following table shows the purchase price and percentage yield on the investment in each company. Purchase Priceper Share ($) Yield (%) Duffin House (DHS) 8 20 Higgins Press (HPR) 10 15 Sickle Publications (SPUB) 15 15 He invested $25,000 in a total of 2,600 shares and made a $4,350 profit from the transactions. How many shares in each company did he purchase? Duffin House shares Higgins Press shares Sickle Publications shares I have x+y+z=2600 8x+10y+15z=25,000 160x+150y+225z=435,000 i keep getting y=506, i know im doing something wrong :(
Strubeck Corporation sponsors a pension plan for its employees. It manages part of the equity portfolio in-house and delegates management of the balance to Super Trust Company. As chief investment officer of Strubeck, you want to review the performance of the in-house and Super Trust portfolios over the last four quarters. You have arranged for outflows and inflows to the portfolios to be made at the very beginning of the quarter. The table below summarizes the inflows and outflows as well as the two portfolios’ valuations. In the table, the ending value is the portfolio’s value just prior to the cash inflow or outflow at the beginning of the quarter. The amount invested is the amount each portfolio manager is responsible for investing.Table 1: Cash Flows for the In-House Strubeck Account and the Super Trust AccountPeriod Quarters 1 2 3…
Why do the results imply that long term investing is less risky than short term investing
A business lady is wondering whether to invest OMR10,000 in buying bonds at Muscat Security Market (MSM) or put it in a fixed deposit account in Sohar bank at an interest rate of 9%. For the MSM, if the market is good, she believes that she could get a 14% return on her money. With a fair market, she expects to get an 8% return. If the market is bad, she will most likely get no return, i.e., the return would be 0%. She estimates that the probability of a good market is 0.4, the probability of a fair market is 0.4, and the probability of a bad market is 0.2, and she wishes to maximize her long-run average return. a. Develop a decision/payoff table for this problem. b. What is the best decision? c. Calculate the expected value of perfect information and interpret the result. d. The business lady is thinking about paying for a financial advising company that could predict very accurately whether the market would be good, fair, or bad. Advise the business lady on the maximum amount of…
4. An investor is considering three types of investments: a high-risk venture into oil leases with a potential return of 15%, a medium-risk investment in bonds with a 9% return, and a relatively safe stock investment with a 5% return. He has $50,000 to invest. Because of the risk, he will limit his investment in oil leases and bonds to 30% (of the $50,000) and his investment in oil leases and stock to 50%. How much should he invest in each to maximize his return, assuming investment returns are as expected? (a) Define the variables. Be specific with descriptive words. x₁ = x₂ = x3 = (b) Clearly state the constraints (all inequalities) related to the feasible region. (c) State the objective function. 7
Chapter 6. Crypt-Me-Not Investments, Inc. is a new investment firm that deals exclusively with cryptocurrency investments. An investor wants to invest $75,000 in cryptocurrency next year and approaches them about investing in Solana (SOL) and Dogecoin (DOGE) which are currently selling at $175 and $1.00, respectively. The expected annual return on each unit of SOL is $180 and on each unit of DOGE is $100 and like everyone else, the investor wants to maximize their returns. The risk index associated with each unit of SOL is 1.6 and with each unit of DOGE is 1.8. Crypt-Me-Not recommends not crossing a total risk value of 2500 with the client’s investments. Moreover, since DOGE is substantially cheaper and less risky than SOL, the investor insists that a minimum of 1,000 units of DOGE in the portfolio is necessary. Based on these constraints, formulate a Linear Program and answer the following questions after solving it using Solver in Excel (Round up to the next whole number for first…
A group of medical professionals is considering constructing a private clinic. If a patient demand for the clinic is high, the physicians could realize a net profit of $120,000. If the demand is low, they could lose $55,000. Of course, they do not have to proceed at all, in which case there is no cost. In the absence of any market data, the best the physicians can guess is that there is a 50-50 chance the demand would be high. a) Create a decision tree. b) What should the medical professionals do? What is the payoff? c) The physicians have been approached by a market research firm that offers to perform a study of the market at a fee of $5,000. The market researchers claim that their experience enables them to use Bayes’ theorem to make the following statements of probability: -probability of high demand given a positive survey result = 0.82 -probability of low demand given a positive survey result = 0.18 -probability of high demand given a negative survey result = 0.11 -probability of…
Questions a. - c. refer to the following data. You estimate a 3-factor return-generating process for 5 large portfolios with the following results. a. Which two portfolios are functional equivalents according to the Arbitrage Pricing Theory? b. What is the expected return on portfolio B? c. Suppose that the market is currently pricing portfolio E so that its expected return is 8% and pricing portfolio B so that its expected return is 10%. Describe the forces that will bring about equilibrium according to the APT.

SEE MORE QUESTIONS

Recommended textbooks for you

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

MATLAB: An Introduction with Applications

Statistics

ISBN:

9781119256830

Author:

Amos Gilat

Publisher:

John Wiley & Sons Inc

Probability and Statistics for Engineering and th…

Statistics

ISBN:

9781305251809

Author:

Jay L. Devore

Publisher:

Cengage Learning

Statistics for The Behavioral Sciences (MindTap C…

Statistics

ISBN:

9781305504912

Author:

Frederick J Gravetter, Larry B. Wallnau

Publisher:

Cengage Learning

Elementary Statistics: Picturing the World (7th E…

Statistics

ISBN:

9780134683416

Author:

Ron Larson, Betsy Farber

Publisher:

PEARSON

The Basic Practice of Statistics

Statistics

ISBN:

9781319042578

Author:

David S. Moore, William I. Notz, Michael A. Fligner

Publisher:

W. H. Freeman

Introduction to the Practice of Statistics

Statistics

ISBN:

9781319013387

Author:

David S. Moore, George P. McCabe, Bruce A. Craig

Publisher:

W. H. Freeman

SEE MORE TEXTBOOKS