Chapter 05 Risk and Return: Past and Prologue 1. The 1% VaR achieve be less than -30%. As percentile or fortune of a lessen declines so does the magnitude of that concede. Thus, a 1 percentile probability depart produce a runty VaR than a 5 percentile probability. 2. The geometric return represents a compounding growth number and go forth artificially inflate the annual performance of the portfolio. 3. No. Since all items atomic number 18 presented in token(a) figures, the input should also use nominal data. 4. Decrease. Typically, hackneyed deviation exceeds return. Thus, a reduction of 4% in to each one will artificially decrease the return per social social unit of risk. To return to the proper risk return relationship the portfolio will need to decrease the amount of risk free investments. 5. E(r) = [0.3 Ã 44%] + [0.4 Ã 14%] + [0.3 Ã (16%)] = 14% (2 = [0.3 Ã (44 14)2] + [0.4 Ã (14 14)2] + [0.3 Ã (16 14)2] = 540 ( = 23.24% The mean is unchanged, on the button the standard deviation has increased. 6. a. The holding period returns for the three scenarios atomic number 18: Boom:(50 40 + 2)/40 = 0.30 = 30.00% ruler:(43 40 + 1)/40 = 0.10 = 10.00% Recession:(34 40 + 0.50)/40 = 0.1375 = 13.75% E(HPR) = [(1/3) Ã 30%] + [(1/3) Ã 10%] + [(1/3) Ã (13.75%)] = 8.75% (2(HPR) = [(1/3) Ã (30 8.75)2] + [(1/3) Ã (10 8.75)2] + [(1/3) Ã (13.75 8.75)2] = 319.
79 ( = [pic]= 17.88% b. E(r) = (0.5 Ã 8 .75%) + (0.5 Ã 4%) = 6.375% ! ( = 0.5 Ã 17.88% = 8.94% 7. a. Time-weighted average returns are ground on year-by-year rates of return. | course of instruction |Return = [(capital gains + dividend)/price] | |2007-2008 |(110 coke + 4)/100 = 14.00% | |2008-2009 |(90 110 + 4)/110 = 14.55% |...If you motive to get a full essay, order it on our website: OrderEssay.net
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