Question 1 We have the historical returns of two risky assets: asset_A asset_B Date 4/30/2020 -0.1554...
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Question 1 We have the historical returns of two risky assets: asset_A asset_B Date 4/30/2020 -0.1554 0.1363 5/31/2020 0.0851 0.0254 6/30/2020 0.1474 0.1106 7/31/2020 0.1651 0.0074 8/31/2020 0.2166 0.1028 9/30/2020 -0.1025 -0.0674 Calculate stock expected return and variance of return using time-series analysis. Given that the correlation coefficient between A and B is 0.1511. Assume that the risk-free rate is 0.5%. Also assume that investors degree of risk aversion is 10. If we form a portfolio using asset A and B, what is the weight of asset A in the optimal risky portfolio / tangency portfolio (the portfolio with the highest sharp ratio) 28.37% 13.22% 21.60% 10 poin 19.31% Question 2 10 points Save Answer After the public announcement of the merger of two firms an investor makes abnormal returns by going long on the target firm and short on the acquiring firm. This most likely violates which form of market efficiency? Both semi-strong and weak forms Both strong and weak forms Both semi-strong and strong forms None is violated OOO O Question 3 John was offered $10 for sure or a gamble with a 10% chance of winning $100 an 90% chance of getting $0. He chose the sure $10. This is consistent with risk loving risk aversion risk neutral maximizing expected value Question 1 We have the historical returns of two risky assets: asset_A asset_B Date 4/30/2020 -0.1554 0.1363 5/31/2020 0.0851 0.0254 6/30/2020 0.1474 0.1106 7/31/2020 0.1651 0.0074 8/31/2020 0.2166 0.1028 9/30/2020 -0.1025 -0.0674 Calculate stock expected return and variance of return using time-series analysis. Given that the correlation coefficient between A and B is 0.1511. Assume that the risk-free rate is 0.5%. Also assume that investors degree of risk aversion is 10. If we form a portfolio using asset A and B, what is the weight of asset A in the optimal risky portfolio / tangency portfolio (the portfolio with the highest sharp ratio) 28.37% 13.22% 21.60% 10 poin 19.31% Question 2 10 points Save Answer After the public announcement of the merger of two firms an investor makes abnormal returns by going long on the target firm and short on the acquiring firm. This most likely violates which form of market efficiency? Both semi-strong and weak forms Both strong and weak forms Both semi-strong and strong forms None is violated OOO O Question 3 John was offered $10 for sure or a gamble with a 10% chance of winning $100 an 90% chance of getting $0. He chose the sure $10. This is consistent with risk loving risk aversion risk neutral maximizing expected value
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The detailed answer for the above question is provided below Question 1 Part 1 Stock Expected Return and Variance Expected Return Calculate the individual historical returns for each asset asset A and ... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
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