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1. Stock ABC has an expected return of 10% and a standard deviation of returns of 5%. Stock XYZ has an expected return of 12% and a standard deviation of returns of 7%. You would like to invest $3000 in stock ABC and $2000 in stock XYZ. The correlation between the two stocks is .5. The expected market return is 11% and the risk free rate is 4%. Which of the following is false?
1. The expected return of the portfolio is 10.8%
2. The standard deviation of portfolio returns is 5.02%.
3. The beta of the portfolio is 1.3.
4. Based on the mean-standard deviation rule, we cannot choose between stock XYZ to stock ABC.
2. Suppose you observe a spot exchange rate of $1.0500/€. If interest rates are 5% APR in the U.S.and 3% APR in the euro zone, what is the no-arbitrage 1-year forward rate?
A)€1.0704/$ B) $1.0300/€ C) $1.0704/€ D) €1.0300/$
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In the examples given in the chapter, there is not much monetary difference between owning versus leasing.
The assignment is about the balance sheet of a bank, how different it is from the balance sheet of a non-financial company etc
Assuming that the forward exchange rate is the best predictor of the future spot rate,
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