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You are attempting to construct an optimal portfolio consisting of T-bills and a risky portfolio. The expected return on the risky portfolio is 19% and the standard deviation is 25%. The T-bill rate is 5.3%. (a) If you put 45% of your funds in T-bills and 55% in the risky portfolio, what is the expected return and standard deviation of your overall portfolio? (b) Construct a Capital Allocation Line for a portfolio consisting of the T-bills and the risky portfolio. Draw the line and indicate the y-intercept and the point where the portfolio is entirely made up of risky assets. What is the slope of this line? (c) Suppose that Robin has a degree of risk aversion of A = 3. What is the optimal portfolio for this investor? In other words, what is the optimal weight (y) in the risky portfolio and what is the optimal weight (1-y) in T-bills? (d) What is the expected return and standard deviation on the optimal portfolio for Robin? Illustrate this point on your CAL graph you drew in Part (b). (e) Now suppose Mindy has a degree of risk aversion of A = 6. What is the optimal weight (y) in the risky portfolio and what is the optimal weight (1-y) in T-bills for Mindy? Briefly explain why Mindy’s optimal weight in the risky portfolio differs from Robin’s?
How does global economic competition impact the domestic market and decisions related to the strategy a firm uses to compete? Why do some economists oppose trade restrictions? Explain your answer.
an economy has a total amount of 100 units of a good to allocate between two persons-amanda and britney. amandas
One problem in using this function to study consumer surplus is that Q never reaches zero, no matter how high P is. Hence, suppose that the function holds only for P ? 10 and that Q = 0 for P > 10. How should you graph in part b be adjusted to fit th..
Explain how much extra surplus does the producer capture when it engages in first-degree price discrimination instead of charging a single price.
Which of the following is (are) true about the loanable funds market?
Assume that The United States passes a law that allows an additional 1 million persons to immigrate to the United States each year. Discuss the effects that this will have on the Production Posibilities Fromtier. (identify at least 3 effects)
These options also sell for $3 each. Strategy C is to establish a zero-cost collar by writing the January calls and buying the January puts.
In the short-run, if a firm has decreasing returns, does it have increasing, constant, or decreasing marginal cost? Explain. What about if it has constant returns? Increasing returns? Explain.
borrow 1000 at t=0. Make exact interest only payments at the end of each year for 4 years and at the end of the 4th year repay the entire principal in addition to the last interest payment. borrow 10000 at t=0. Pay a principal payment each year of 25..
How much profit does each firm earn. Ignoring antitrust considerations, would it be profitable for your firm to merge with Fasten It If not, explain why not; if so, put together an offer that would permit you to profitably complete merger.
Describe demand and marginal income curves faced by a industry in a purely competitive market. Are they different from those faced by a industry in oligopolistic competition.
List three types of consumer protection laws in banking and give an example of each type. Fair Debt Collection Practices Act (1977). Federal Trade Commission Improvement Act (1980)
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