g Assets with random rates of return r1, r2 have expected rates ¯r1 = 1, ¯r2 = 2, variances σ1 2 = 1, σ2 2 = 3 and covariance σ1,2 = 1. Consider portfolios consisting of weights w1 = 1 − α and w2 = α of these assets. a) Find weights, expected rate of return ¯rMVP, and volatility σMVP for the minimum variance portfolio. b) Make a sketch in the σ, r¯ plane of the portfolio curve. Label the asset points (σ1, r¯1), (σ2, r¯2), the minimum variance point (σMVP, r¯MVP), and the efficient frontier. c) An individual with utility function U(y) = 16y−y 2 and with unit initial wealth constructs a portfolio consisting of fractions 1 − α and α of these assets. Find the maximum over α of the expected utility E[U(1 + rp(α))], where rp(α) is the portfolio rate of return. d) Calculate σp, ¯rp for the portfolio corresponding to the maximum expected utility, and show that this portfolio is efficient.
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Business, 22.06.2019 06:00, esnyderquintero
Cash flow is often a problem for small businesses. how can an entrepreneur increase cash flow? a) locate lower-priced suppliers. b) forego sending in estimated tax payments to the irs c) shorten the terms on a bank loan to pay it off more quickly d) sell more low-margin items.
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Business, 22.06.2019 07:30, mdndndndj7365
Which of the following best describes why you need to establish goals for your program?
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Business, 22.06.2019 21:10, elijahedgar876
Which statement or statements are implied by equilibrium conditions of the loanable funds market? a firm borrowing in the loanable funds market invests those funds with a higher expected return than any firm that is not borrowing. investment projects which use borrowed funds are guaranteed to be profitable even after paying interest expenses. the quantity of savings is maximized, thus the quantity of investment is maximized. a loan is made at the minimum interest rate of all current borrowing.
Answers: 3
g Assets with random rates of return r1, r2 have expected rates ¯r1 = 1, ¯r2 = 2, variances σ1 2 = 1...
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