1a. Set up the complete formula for Dollar Weighted Return (DWR) for the following portfolio including final value of the portfolio.

Year	0	1	2	3	4
Actions at the ending of the year	Starting with $1000	Adding $100	Withdrawing $200	Adding $300	Ending Value = ?
ROR during each Yr	-	8%	- 4%	9%	3%

2 b.Calculate the time weighted return (TWR)

3. Provide an indicator of performance based on Treynor and select the better performing portfolio.

		Data
Portfolio	1	2
Return	14%	12%
Risk free	4%	4%
Beta	1.3	1.1
Standard Deviation	22%	18%

4. A dynamic asset allocation model is described as:

Dollars Invested in Stock = 2 (Assets-Floor).

Where assets are $700 and floor is desired to be $550.

a) Calculate the initial asset allocation to stocks and bonds.

b) If stock falls by 15%, calculate the new asset allocation to stocks and bonds.

5. Consider the following portfolio and revise it with futures contracts.

Stock 8,000,000

Bonds 4,000,000

Cash 2, 000 000

Total 14,000,000

S&P 500 index futures = 2070 with multiplier of 250. You decide to go short 5 stock futures contracts.

Treasury bonds futures are priced at 162-20. You decide to go long 12 bond futures contracts. T. bond futures are based on $100,000 par value.

Portfolio	Current Weight	Futures Position	Revised Portfolio	Revised Weights
Stock= Stock= Cash=
Total =

6. You are considering the results of the following strategies: Alternative 1: Allocate 100% of your wealth to buying stock. Alternative 2: Allocate 93% of your wealth to buying Treasury Bills and the remaining 7% to buying call options on S&P 500 index. Your wealth is $100 The current price of stock is $100 The call option premium is $7 with an exercise price of 105 Treasury Bill return is 2.5% and its price is $93. Show your final results in the following table on next page:

Alternative #1		Alternative #2
Likely Stock Prices	Gain or Loss	ROR		Treasury Bill Year-End Results	Call Value at year-end	Portfolio Value at year-end	gain or Loss	ROR
100
70
130