FINE 441 Lecture Notes - Lecture 5: 18S Ribosomal Rna, Efficient Frontier, Standard Deviation

• School: McGill University
• Department: Finance
• Course: FINE 441
• Professor: Larbi Hammami

Document Summary

Multiple choice (10 marks-1 mark each: e, b, d, a, c. 08 . 15: let ws = % invested in stock. [4 marks] e(rp) = . 2214 x . 12 + . 7786 x . 05 = . 0655: [4 marks] if rf is not available: 100% invested in b is feasible but not the best choice for very risk averse investors. We can find another portfolio p such that e(rp) > 5% = e(rb) for the same risk of b: a. Collateral 3000: [3 marks] maintenance margin = 2000/6000=. 333 or 33. 3% The expected return on stocks a and b are. The standard deviation of the return on stocks a and b are. A = [0. 3(0. 2 0. 056)2 + 0. 3(0. 12 0. 056)2 + 0. 4( 0. 1 0. 056)2]1/2= 0. 1311, B = [0. 3(0. 08 0. 029)2 + 0. 3( 0. 05 0. 029)2 + 0. 4(0. 05 0. 029)2]1/2= 0. 0532. [5 marks] e(rp) = . 05 = ya . 056 + yb . 029 ya = 7/9 & ya = 2/9.