A big pharmaceuticalâ company, DRIg, has just announced a potential cure for cancer. The stock price increased from $ 2 to $ 140 in one day. A friend calls to tell you that he owns DRIg. You proudly reply that youâ do, too. Since you have been friends for someâ time, you know that he holds theâ market, as doâ you, and so you both are invested in this stock. Both of you care only about expected return and volatility. Theâ risk-free rate is 3 %, quoted as an APR based on aâ 365-day year. DRIg made up 1.34 % of the market portfolio before the news announcement.
a. On the announcement your overall wealth went up by 0.9 % â(assume all other price changes cancelled out so that withoutâ DRIg, the market return would have beenâzero). How is your wealthâ invested? (Round all intermediate values to five decimal places asâ needed.)
The percentage of your wealth invested in the market is _%. (Round to two decimalâ places.)
b. Yourâ friend's wealth went up by 1.7 %. How is his wealthâ invested?
A big pharmaceuticalâ company, DRIg, has just announced a potential cure for cancer. The stock price increased from $ 2 to $ 140 in one day. A friend calls to tell you that he owns DRIg. You proudly reply that youâ do, too. Since you have been friends for someâ time, you know that he holds theâ market, as doâ you, and so you both are invested in this stock. Both of you care only about expected return and volatility. Theâ risk-free rate is 3 %, quoted as an APR based on aâ 365-day year. DRIg made up 1.34 % of the market portfolio before the news announcement.
a. On the announcement your overall wealth went up by 0.9 % â(assume all other price changes cancelled out so that withoutâ DRIg, the market return would have beenâzero). How is your wealthâ invested? (Round all intermediate values to five decimal places asâ needed.)
The percentage of your wealth invested in the market is _%. (Round to two decimalâ places.)
b. Yourâ friend's wealth went up by 1.7 %. How is his wealthâ invested?
