College Mathematics for Business, Economics, Life Sciences, and Social Sciences (14th Edition)
14th Edition
ISBN: 9780134674148
Author: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen, Christopher J. Stocker
Publisher: PEARSON
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Chapter 5.2, Problem 47E
To determine
To graph: The solution region of the system of inequalities
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4. Assume that a risk-free money market account is added to the market described in Q3.
The continuously compounded rate of return on the money market account is log (1.1).
(i) For each given μ, use Lagrange multipliers to determine the proportions (as a
function of μ) of wealth invested in the three assets available for the minimum
variance portfolio with expected return μ.
(ii) Determine the market portfolio in this market and calculate its Sharp ratio.
3. A market consists of two risky assets with rates of return R₁ and R2 and no risk-free
asset. From market data the following have been estimated: ER₁ = 0.25, ER2 = 0.05,
Var R₁ = 0.01, Var R2 = 0.04 and the correlation between R1 and R2 is p = -0.75.
(i) Given that an investor is targeting a total expected return of μ = 0.2. What
portfolio weights should they choose to meet this goal with minimum portfolio
variance? Correct all your calculations up to 4 decimal points.
(ii) Determine the global minimum-variance portfolio and the expected return and
variance of return of this portfolio (4 d.p.).
(iii) Sketch the minimum-variance frontier in the μ-σ² plane and indicate the efficient
frontier.
(iv) Without further calculation, explain how the minimum variance of the investor's
portfolio return will change if the two risky assets were independent.
2. A landlord is about to write a rental contract for a tenant which lasts T months. The
landlord first decides the length T > 0 (need not be an integer) of the contract, the
tenant then signs it and pays an initial handling fee of £100 before moving in. The
landlord collects the total amount of rent erT at the end of the contract at a continuously
compounded rate r> 0, but the contract stipulates that the tenant may leave before T,
in which case the landlord only collects the total rent up until the tenant's departure
time 7. Assume that 7 is exponentially distributed with rate > 0, λ‡r.
(i) Calculate the expected total payment EW the landlord will receive in terms of T.
(ii) Assume that the landlord has logarithmic utility U(w) = log(w - 100) and decides
that the rental rate r should depend on the contract length T by
r(T)
=
λ
√T
1
For each given λ, what T (as a function of X) should the landlord choose so as to
maximise their expected utility? Justify your answer.
Hint. It might be…
Chapter 5 Solutions
College Mathematics for Business, Economics, Life Sciences, and Social Sciences (14th Edition)
Ch. 5.1 - Graph 6x − 3y > 18.
Ch. 5.1 - Prob. 2MPCh. 5.1 - Prob. 3MPCh. 5.1 - Prob. 4MPCh. 5.1 - Prob. 1EDCh. 5.1 - Prob. 1ECh. 5.1 - Prob. 2ECh. 5.1 - Prob. 3ECh. 5.1 - Prob. 4ECh. 5.1 - Prob. 5E
Ch. 5.1 - Prob. 6ECh. 5.1 - Prob. 7ECh. 5.1 - Prob. 8ECh. 5.1 - Prob. 9ECh. 5.1 - Prob. 10ECh. 5.1 - Prob. 11ECh. 5.1 - Prob. 12ECh. 5.1 - Prob. 13ECh. 5.1 - Graph each inequality in Problems 9–18.
14. y < 5
Ch. 5.1 - Prob. 15ECh. 5.1 - Prob. 16ECh. 5.1 - Prob. 17ECh. 5.1 - Prob. 18ECh. 5.1 - In Problems 19–22,
graph the set of points that...Ch. 5.1 - Prob. 20ECh. 5.1 - In Problems 19-22,
graph the set of points that...Ch. 5.1 - Prob. 22ECh. 5.1 - Prob. 23ECh. 5.1 - In Problems 23–32, define the variable and...Ch. 5.1 - In Problems 23–32, define the variable and...Ch. 5.1 - Prob. 26ECh. 5.1 - Prob. 27ECh. 5.1 - Prob. 28ECh. 5.1 - Prob. 29ECh. 5.1 - Prob. 30ECh. 5.1 - Prob. 31ECh. 5.1 - Prob. 32ECh. 5.1 - In Exercises 33–38, state the linear inequality...Ch. 5.1 - In Exercises 33–38, state the linear inequality...Ch. 5.1 - In Exercises 33–38, state the linear inequality...Ch. 5.1 - Prob. 36ECh. 5.1 - Prob. 37ECh. 5.1 - Prob. 38ECh. 5.1 - In Problems 39–44, define two variables and...Ch. 5.1 - In Problems 39–44, define two variables and...Ch. 5.1 - Prob. 41ECh. 5.1 - Prob. 42ECh. 5.1 - Prob. 43ECh. 5.1 - In Problems 39–44, define two variables and...Ch. 5.1 - In Problems 45–54, graph each inequality subject...Ch. 5.1 - Prob. 46ECh. 5.1 - In Problems 45–54, graph each inequality subject...Ch. 5.1 - Prob. 48ECh. 5.1 - In Problems 45–54, graph each inequality subject...Ch. 5.1 - Prob. 50ECh. 5.1 - Prob. 51ECh. 5.1 - Prob. 52ECh. 5.1 - Prob. 53ECh. 5.1 - Prob. 54ECh. 5.1 - Applications
In Problems 55–66, express your...Ch. 5.1 - Prob. 56ECh. 5.1 - Prob. 57ECh. 5.1 - Prob. 58ECh. 5.1 - Prob. 59ECh. 5.1 - Prob. 60ECh. 5.1 - Prob. 61ECh. 5.1 - Prob. 62ECh. 5.1 - Prob. 63ECh. 5.1 - Prob. 64ECh. 5.1 - Prob. 65ECh. 5.1 - Prob. 66ECh. 5.2 - Matched Problem 1 Solve the following system of...Ch. 5.2 - Prob. 2MPCh. 5.2 - Prob. 3MPCh. 5.2 - Prob. 1EDCh. 5.2 - Prob. 1ECh. 5.2 - Prob. 2ECh. 5.2 - Prob. 3ECh. 5.2 - Prob. 4ECh. 5.2 - Prob. 5ECh. 5.2 - Prob. 6ECh. 5.2 - Prob. 7ECh. 5.2 - Prob. 8ECh. 5.2 - In Problems 9–12, match the solution region of...Ch. 5.2 - Prob. 10ECh. 5.2 - Prob. 11ECh. 5.2 - Prob. 12ECh. 5.2 - Prob. 13ECh. 5.2 - Prob. 14ECh. 5.2 - Prob. 15ECh. 5.2 - Prob. 16ECh. 5.2 - In Problems 17–20, match the solution region of...Ch. 5.2 - Prob. 18ECh. 5.2 - In Problems 17–20, match the solution region of...Ch. 5.2 - Prob. 20ECh. 5.2 - Prob. 21ECh. 5.2 - Prob. 22ECh. 5.2 - Prob. 23ECh. 5.2 - Prob. 24ECh. 5.2 - Prob. 25ECh. 5.2 - Prob. 26ECh. 5.2 - Prob. 27ECh. 5.2 - Prob. 28ECh. 5.2 - Prob. 29ECh. 5.2 - Prob. 30ECh. 5.2 - Prob. 31ECh. 5.2 - Prob. 32ECh. 5.2 - Prob. 33ECh. 5.2 - Prob. 34ECh. 5.2 - Prob. 35ECh. 5.2 - Prob. 36ECh. 5.2 - Prob. 37ECh. 5.2 - Prob. 38ECh. 5.2 - Prob. 39ECh. 5.2 - Prob. 40ECh. 5.2 - Prob. 41ECh. 5.2 - Prob. 42ECh. 5.2 - Prob. 43ECh. 5.2 - Prob. 44ECh. 5.2 - Prob. 45ECh. 5.2 - Prob. 46ECh. 5.2 - Prob. 47ECh. 5.2 - Prob. 48ECh. 5.2 - Prob. 49ECh. 5.2 - Prob. 50ECh. 5.2 - Prob. 51ECh. 5.2 - Prob. 52ECh. 5.2 - Water skis. Refer to Problem 51. The company...Ch. 5.2 - Prob. 54ECh. 5.2 - Prob. 55ECh. 5.2 - Prob. 56ECh. 5.2 - Psychology. A psychologist uses two types of boxes...Ch. 5.3 - A manufacturing plant makes two types of...Ch. 5.3 - Prob. 2MPCh. 5.3 - Prob. 3MPCh. 5.3 - Prob. 1EDCh. 5.3 - Prob. 2EDCh. 5.3 - Prob. 1ECh. 5.3 - Prob. 2ECh. 5.3 - Prob. 3ECh. 5.3 - Prob. 4ECh. 5.3 - Prob. 5ECh. 5.3 - Prob. 6ECh. 5.3 - Prob. 7ECh. 5.3 - Prob. 8ECh. 5.3 - Prob. 9ECh. 5.3 - Prob. 10ECh. 5.3 - Prob. 11ECh. 5.3 - Prob. 12ECh. 5.3 - Prob. 13ECh. 5.3 - Prob. 14ECh. 5.3 - Prob. 15ECh. 5.3 - Prob. 16ECh. 5.3 - Solve the linear programming problems stated in...Ch. 5.3 - Prob. 18ECh. 5.3 - Prob. 19ECh. 5.3 - Prob. 20ECh. 5.3 - Prob. 21ECh. 5.3 - Prob. 22ECh. 5.3 - Prob. 23ECh. 5.3 - Solve the linear programming problems stated in...Ch. 5.3 - Prob. 25ECh. 5.3 - Solve the linear programming problems stated in...Ch. 5.3 - Prob. 27ECh. 5.3 - Prob. 28ECh. 5.3 - Prob. 29ECh. 5.3 - Prob. 30ECh. 5.3 - Prob. 31ECh. 5.3 - Prob. 32ECh. 5.3 - Prob. 33ECh. 5.3 - Prob. 34ECh. 5.3 - Prob. 35ECh. 5.3 - Solve the linear programming problems stated in...Ch. 5.3 - Prob. 37ECh. 5.3 - Prob. 38ECh. 5.3 - In Problems 39 and 40, explain why Theorem 2...Ch. 5.3 - In Problems 39 and 40, explain why Theorem 2...Ch. 5.3 - Prob. 41ECh. 5.3 - Prob. 42ECh. 5.3 - Prob. 43ECh. 5.3 - Prob. 44ECh. 5.3 - Prob. 45ECh. 5.3 - Prob. 46ECh. 5.3 - Prob. 47ECh. 5.3 - Problems 41–48 refer to the bounded feasible...Ch. 5.3 - In Problems 49-64, construct a mathematical model...Ch. 5.3 - Prob. 50ECh. 5.3 - In Problems 49–64, construct a mathematical model...Ch. 5.3 - Prob. 52ECh. 5.3 - In Problems 49–64, construct a mathematical model...Ch. 5.3 - Prob. 54ECh. 5.3 - In Problems 49–64, construct a mathematical model...Ch. 5.3 - Prob. 56ECh. 5.3 - Prob. 57ECh. 5.3 - Prob. 58ECh. 5.3 - Prob. 59ECh. 5.3 - Prob. 60ECh. 5.3 - Prob. 61ECh. 5.3 - Prob. 62ECh. 5.3 - Psychology. A psychologist uses two types of boxes...Ch. 5.3 - Sociology. A city council voted to conduct a study...Ch. 5 - Prob. 1RECh. 5 - Prob. 2RECh. 5 - Prob. 3RECh. 5 - Prob. 4RECh. 5 - Prob. 5RECh. 5 - Prob. 6RECh. 5 - Prob. 7RECh. 5 - Prob. 8RECh. 5 - Prob. 9RECh. 5 - Prob. 10RECh. 5 - Prob. 11RECh. 5 - Prob. 12RECh. 5 - Prob. 13RECh. 5 - Prob. 14RECh. 5 - In Problems 15 and 16, construct a mathematical...Ch. 5 - Prob. 16RE
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