Graded Home Work #1 FIN 352 Investments, Fall 2019 Dr. ZarBabal Do everything in Excel, and upload your Excel spreadsheet to blackboard. Please ask a classmate if you are not sure how to upload the...

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Answered Same DaySep 23, 2021

Answer To: Graded Home Work #1 FIN 352 Investments, Fall 2019 Dr. ZarBabal Do everything in Excel, and upload...

Pooja answered on Sep 24 2021
148 Votes
1
        Invest in Stocks    Probability    Expected future portfolio value in one year    Expected Dividend or c
oupon in one year
            0.08    10000    0
            0.45    13000    500
            0.35    14000    1000
            0.12    18000    1000
        Invest in 1yr Zero coupon bond    1    12360    0
    a)
        Risk premium is extra premium earned from investing in stock market over the risk free rate.
        Rsik premium =        Rm - Rf
        where,    Rm =    Market return over next year
            Rf =    Risk free rate
        Rp =    sum [ probability stock i * [(Future value of stock I + dividend earned for I )/ Invested Value of i -1] ; i=1,2,…,n
        Rp =    20.04%
        Rf =    0.03
        Rp = Rf + Beta ( Rm - Rf)
        (Rp - Rf)/beta + Rf = Rm
        Rm =    20.04%
    b)
        Risk free bond yield =    3%
    c)
        Sharpe ratio = (Rp- Rf) / Standard deviation of market
        Sharpe ratio    0.17
         -> sub-optimal
qm-pricehistory-current-nrhwyoq
    Date    Open    High    Low    Close    VWAP    Unadj. Open    Unadj. High    Unadj. Low    Unadj. Close    Unadj. VWAP    Volume    Change Percent    Change    Trade Value    Total Trades    Total...
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