Consider a portfolio that consists of an equal investment in 20 firms. For each of these firms, there is a 70% probability that the firms will have a 16% return and a 30% that they will have a – 8% re

ess interest rate is 8%, the expected return to the market portfolio is 0.13, and the standard deviation of the return to the market portfolio is 0.25. Assuming this portfolio is efficient, what is its beta？

A、1.8

B、2.1

C、2.0

D、2.4

Consider a U.S. portfolio manager who holds a portfolio of French stocks currently worth €10 million. In order to hedge against a potential depreciation of the euro, the portfolio manager proposes to sell December futures contracts on the euro that currently trade at $1/€ and expire in two months. The spot exchange rate is currently $1.1/€. A month later, the value of the French portfolio is €10,050,000 and the spot exchange rate is $1.05/€, while the futures exchange rate is $0.95/€. a. Evaluate the effectiveness of the hedge by comparing the fully hedged portfolio return with the unhedged portfolio return. b. Calculate the return on the portfolio, assuming a 35 percent hedge ratio.

Consider an opportunity to invest in two Canadian stocks on an equally-weighted portfolio with return distributions as follow.(1) Calculate the expected returns and standard deviations of the returns for the two stocks. (2) Calculate the expected return and standard deviation of the return for the equally-weighted portfolio. (3) Calculate the covariance of the returns for Maple and Walrus. (4) Calculate the correlation coefficient for Maple and Walrus, and explain the relationship among the standard deviations for Maple, Walrus, and the portfolio？

A.$2 million

B.$1.414 million

C.$1.483 million

D.$1.449 million

A、Consider the suitability of the portfolio relative to the clients needs and situation.

B、Make investment decision that is consistent with the stated objectives and constraints of the fund.

C、Make investment decisions in the context of the clients total portfolio.

period is 0.25, the standard deviation of the return to the market portfolio over this same period is 0.25, and the average degree of risk aversion among traders is 3. If the government wishes to issue risk-free zero-coupon bonds with a term to maturity of one period and a face value per bond of $100,000, how much can the government expect to receive per bond？

A、$94,117.65

B、$95,117.65

C、$93,117.65

D、$91,117.65

A.E(r) = 0.15; Standard deviation = 0.20

B.E(r) = 0.15; Standard deviation = 0.10

C.E(r) = 0.10; Standard deviation = 0.10

D.E(r) = 0.20; Standard deviation = 0.15

s A and B combined. Given this information about securities A,B, & C, which of the following statements is INCORRECT？

A、If the total price of A and B is cheaper than the price of C, then we could make a profit selling A and B and buying C.

B、Price(C) = Price(A) + Price(B)

C、Because security C is equivalent to the portfolio of A and B, by the law of one price they must have the same price.

D、The relationship known as value additivity says that the value of a portfolio is equal to the sum of the values of its parts.

You are a U.S. investor and currently have a portfolio worth :100 million in German bonds. The current spot exchange rate is €2/$. The current one-year market interest rates are 6 percent in the euro area and 10 percent in the United States. One-year currency options are quoted with a strike price of $0.50/€; a call on euros is quoted at $0.01 per euro, and a put on euros is quoted at $0.012 per euro. You are worried that inflation in euro area will cause a drop in the euro. You consider using forward contracts or options to hedge the currency risk. a. What is the one-year forward exchange rate $::？ b. Calculate the dollar value of your portfolio, assuming that its euro value stays at €100 million; use $:€ spot exchange rates equal in one year to 1.6, 1.8, 2, 2.2, and 2.4. First consider a currency forward hedge, then a currency option insurance. c. What could make your forward hedge imperfect？

A.I and II only.

B.III and IV only.

C.I and III only.

D.II and IV only.