ADM 3352 Study Guide - Midterm Guide: Twat, Large Hadron Collider, Standard Deviation
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Midt
e
rm
Ex
am
ADM3352A
Por
tfolio
Manag
eme
nt
Fa
ll
2009
(1
Hour and 20 minutes)
Prof. C. Guo
Closed-book exam. No material
of
any kind i allowed. A calculator is required.
The
for
mula pages can be detached and need not submit.
Name
(print legibly)
~r-;K
1-1(
("'
Student Number
tatement
of
Academic
Int
e
grit
y
The
School
of
Management
does
not condone academic fraud, an act by a tudent that may
re
ult
in
a fal e academic evaluali n
of
that student
or
of
an ther tudent. Without limiting
l.he
generality
of
thi
definition, academic fraud
occur
when a tudent commit any
of
the
fo
ll
wing offence : plagiarism
or
cheat
ing
of
any kind, u e
of
book , notes, mathematical
tabl
es
, dictionaries
or
other tudy aid unless an explicit written
note
to the contrary appears
on the exam, to have
in
hi
/her
po session camera , radio (radio with head et ), lape
recorders, pag r , cell phone ,
or
any other communication device which has not been
previously authorized
in
writing.
tat
e
ment
to be ign d by the s
tud
ent.:
I have read the text on academic integrity and I pledge not
Lo
have committed
or
attempted
to
oommi/,mio
0
~
d
i
::E
iootioo.
Signed: { W
vCr.
Note: an examination copy
or
booklet without that igned ta£ement wil l not be graded and
wi
ll
receive a final exam
rade
of
zero.
uestion
l
2
Multi
le Choice
Total
r)
Que
lion
1 (35 point )
Consider one share
of
a
ri
ky
as
et
with two po ible outcome at the end
of
the year: it
will be worth $80 if the tate
of
economy i good; it will
be
worth $40 if the state
of
economy
is
bad.
The
a
et
is
to pay $2 dividend per year regardle s the state
of
the
economy.
The
probabilities
of
the good and bad tates are 0.7 and 0.3,
re
pectively. The
ri k-free interest rate i
4%
per year.
3 (1) (5 points)
What
is
lhc expected value
of
the asset?
<;:
(2) (5 point )
Whnt
is
the tandard deviation
of
the value
of
the a set?
S (3) (5 point )
If
you arc
ri
k-n utral,
how
much
are you willing to pay for the a el today?
tj (4) (5 point )
If
you require
l2
% risk premiwn per year, how
much
are you willing
to
pay
for
U1e
a
et
today?
1
~
(5) (15 p int ·) Following your answer to part (4), what i the tandard deviation
of
your
holding period return?
(Extra pace on next page)
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