ECON 2560- Midterm Exam Guide - Comprehensive Notes for the exam ( 13 pages long!)

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5 Oct 2017
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You observe that a plasma tv can be purchased for nothing down and ,000 due in one year. The store next door offers an identical television for ,650, but does not offer credit terms. The market"s consensus forecast is that one- year treasury bills will offer 5% next year. Winter 2016: a stock is expected to pay a dividend of per share next year. The rate of return earned on reinvested funds is 15 percent, the company reinvests 40 percent of earnings in the firm, and investors require a 14 percent return on their investments. Stock a has an expected return of 20% and a standard deviation of 26%. Stock b has an expected return of 7% and a standard deviation of. The proportion of your wealth invested in stock a is 35%. The correlation between the two stocks is 0. 75. What is the standard deviation of the portfolio: 10. 84, 16. 28, 18. 30, 21. 97, 23. 40%

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