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. A charitable organization has issued a bond that gives the holder the option to cash in the principal as either usd 10,000 or nzd 20,000. This asset can be viewed as a usd 10,000 bond plus a call on nzd 20,000 at X = 0.5 usd/nzd. (a) Can the bond also be viewed as a nzd bond plus an option? (b) Explain how the two equivalent views are just an application of Put Call Parity. (c) The strike price, X = usd/nzd, is the natural way of quoting a rate for a US investor. But buying nzd 20,000 at usd/nzd 0.5 is the same as selling usd 10,000 at X = nzd/usd 2. This way of expressing the transaction makes more sense to a New Zealander. Restate the conditions of the bonds using

6.1. Consider an equally weighted portfolio of three stocks, each of which is independently distributed of the others [that is, cov(ri, rj) = 0 for different securities i and j]. Assume also that each stock has the same total risk (). What fraction of each stock's risk is diversified away by including it in this portfolio? 6.2. At the moment, all of your assets are invested in asset A with the following return and risk characteristics: A Er ~ = 10% A = 10% Another asset (call it "B") becomes available; the characteristics of B are as follows; B Er ~ = 20%, B = 25%. Furthermore, the correlation of A's and B's return patterns is -1. By reallocating your portfolio to include some of asset B, how much additional return could you expect to receive if you wanted to maintain your portfolio's risk at = 10%. Hint: Solve for wB, not for wA. 17 6.3. You are a portfolio manager considering whether or not to allocate some of the money with which you are entrusted to the market index of Australian stocks. Your assistant provides you with the following historical return information: Returns Your Portfolio Australian Index 1992 54% 50% 1993 24% 10% 1994 6% 10% 1995 24% 60% 1996 6% 20% 1997 54% 80% a. Show that the addition of the Australian index (AUS) to your portfolio (your) will reduce risk (at no loss in returns) provided corr(your, AUS) < AUS your (assuming, as in the case, AUS > your) b. Based on this historical data could you receive higher returns for the same level of risk (standard deviation) by allocating some of your wealth to the Australian index? c. Based on historical experience, would it be possible to reduce your portfolio's risk below its current level by investing something in the Australian index? d. What fraction of the variation in Australian stocks can be explained by variation in your portfolio's returns? 18 Chapter 8 8.1. Comment fully on the following statement: If a portfolio has a high , then further diversification is possible. 8.2. What is the difference between the relationship implied by the Capital Market Line (CML) and the Security Market Line (SML)? Consider a particular portfolio P with risk P. Under what circumstances will the CML and the SML give the same ? ~ P Er 8.3. Among your numerous assets, you are the owner of a finance company that extends oneyear loans to people to buy appliances and other household goods. A young finance whiz that you just hired suggests that since the default risk of your loans is entirely diversifiable, you should charge your customers (those who are borrowing from you) the risk-free rate. a. What do you think of the suggestion? b. Assume that the risk-free rate is 10 percent and that the probability of default is 5 percent for the next year on a typical loan. In addition, assume that if a borrower defaults, all the principal but no interest is repaid. What rate should your finance company charge for loans over the next year? c. Suppose that the reclaimed appliances have lost 20 percent of their original value and that in the event of default no interest is paid. What rate should you set? 8.4. In the CAPM setting, it is argued that only a fraction of the total risk of a particular asset is priced. Use the CML and SML to prove this assertion. 8.5. Consider two fully isolated economies, economy 1 and economy 2. The same assets are traded in both economies, but the average investor in economy 2 is more risk averse than the average investor in economy 1. Compare the CMLs in both economies. 19 8.6. Consider two fully isolated economies. Asset returns in economy 2 are, in general, more positively correlated than asset returns in economy 1.

Question: To develop a career plan for HR personnel

CRITICAL:

As a 'live' document, this should be something that is of practical use to you Prepare a functional document that includes sub-headings; that has an organisation of information that makes sense Dot points, diagrams, rubrics, images, tables, diagrams or other forms of presenting relevant information will help frame your plan. Career plan should include the following:

A career aspiration statement A plan to take as much control as possible of your current and future digital identity (e.g. practical steps such as sectioning off public from private) A skills self-evaluation (what skills do I have; what skills do I need; what skills do I want to develop). This should be for a. technical skills (i.e. qualifications and certifications) and b. employability skills A SMART Goal action plan to develop one employability skill Career goals: large and small, how to achieve them, and when I will achieve them by Timeline - organise the career plan over 2 - 3 years - using visual elements to chart your progress.