1. Is the strategy testable? If it is not, would you still use it? Why or why not? 2. Assuming that it is testable, what type of test you would need to run to evaluate the strategy?an event study, a portfolio study, or something else? 3. Once you have decided on the type of test, consider the details of how you would go about running the test. (You may not actually have the resources to run the test, but you can still think about how you would do it if you did have the resources.) a. Over what time period would you test the strategy? b. How big does your sample have to be for you to feel comfortable with the results? c. Once you have chosen a time period and sample size, what are the steps involved in running the test? d. How do you plan to incorporate risk and transaction costs into your analysis? e. Assuming that the strategy generates excess returns, what residual concerns would you still have in implementing the strategy?

Suppose that there are two investments with the same probability distribution of returns as in Problem 1.1. The correlation between the returns is 0.15.What is the expected return and standard deviation of return from a portfolio where money is divided equally between the investments? 1.3 For the two investments considered in Figure 1.2 and Table 1.2, what are the alter- native risk-return combinations if the correlation is (a) 0.3, (b) 1.0, and (c) ?1.0? 1.4 What is the difference between systematic and nonsystematic risk? Which is more important to an equity investor? Which can lead to the bankruptcy of a corpora- tion? 1.5 Outline the arguments leading to the conclusion that all investors should choose the same portfolio of risky investments. What are the key assumptions? 1.6 The expected return on the market portfolio is 12% and the risk-free rate is 6%. What is the expected return on an investment with a beta of (a) 0.2, (b) 0.5, and (c) 1.4? 1.7 "Arbitrage pricing theory is an extension of the capital asset pricing model."Explain this statement. 1.8 "The capital structure decision of a company is a trade-off between bankruptcy costs and the tax advantages of debt." Explain this statement. 1.9 What is meant by risk aggregation and risk decomposition? Which requires an in- depth understanding of individual risks? Which requires a detailed knowledge of the correlations between risks? 1.10 A bank's operational risk includes the risk of very large losses because of employee fraud, natural disasters, litigation, and so on. Do you think operational risk is best handled by risk decomposition or risk aggregation? (Operational risk will be dis- cussed in Chapter 23.) 1.11 A bank's profit next year will be normally distributed with a mean of 0.6% of assets and a standard deviation of 1.5% of assets. The bank's equity is 4% of assets. What is the probability that the bank will have a positive equity at the end of the year? Ignore taxes. 1.12 Why do you think that banks are regulated to ensure that they do not take too much risk but most other companies (for example, those in manufacturing and retailing) are not? 1.13 List the bankruptcy costs incurred by the company in Business Snapshot 1.1. 1.14 The return from the market last year was 10% and the risk-free rate was 5%. A hedge fund manager with a beta of 0.6 has an alpha of 4%. What return did the hedge fund manager earn?

IBUS 618 June 2020 3. (15) The international finance function has as its domain 1) investment decisions 2) financing decisions and 3) short term money management decisions. Discuss within the context of how these decisions are contrasted to non-international financial challenges. That is, what is different about these decisions in the international environment?There are n trading posts numbered ltd n as you travel downstream. At anytrading post i you can rent a canoe to be returned at any of the downstream trading posts jz-i. You are given a cost array Elm] giving the cost ofthese rentals. for all :lsi-cjsn. We can assume that Rli,ijr=. and that you can't go upn'ver [so perhaps R.]]= no if iza-. For example. one cost array with n=4 might be the following. The problem is to nd a dynamic programming algorithm that computes the cheapest sequence of rental taking you from post 1 all the I.vay down to post n. In this example. the cheapest way is to rent canoes from post ltd post 3; and then from post 3 to post 4 fora total cost of 5. The second problem is to nd the least cost associated with this sequence. You are to desig n a dynamic programming algorithm for both the problems. Describe the table and what does each entry in the table mean? How will the table be initialized? In which order the table will be lled? What is the recurrence? How will you use the table to nd what is cheapest sequence of canoe rental {for the rst problem} and the least cost of the canoe rentals [for the second problem]? Give the asymptotic com plea-lit}:I of the algorithms lm plement the your algorithm by using C Input: The input consists of n+1lines: the rst line Iwill be a single integer that indicates the nu mberoftrade postsThe next n line-s I.vill give the rental costs that taking post i to j {where is. For example, the input of the above given example would be: 4 1323? 1324 '02 4] Output: Output the minimum cost to travel from post 1 to post n. Output the sequence of canoe renting that achieves the goaL For example, the sample output of the above given example would be: The minimum cost is 5 The renting sequence is l-z-Sh-J-l l have an algorithm to nd the minimum cost. How could I go about printing the renting sequence