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3352 F07 Final.doc

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ADM 3352 APortfolio ManagementsFinal ExamFall 20072 hour and 50 MinutesDr C GuoThis is a closed book exam One page one side of notes is permitted A formula page is provided at the end of the exam question sheet for your convenience which may not include all formulas This page can be detached and needs not submitted Student Name Print legibly Student Number Statement of Academic IntegrityThe School of Management does not condone academic fraud an act by a student that may result in a false academic evaluation of that student or of another student Without limiting the generality of this definition academic fraud occurs when a student commits any of the following offences plagiarism or cheating of any kinduse of books notes mathematical tables dictionaries or other study aid unless an explicit written note to the contrary appears on the exam to have in hisher possession cameras radios radios with head sets tape recorders pagers cell phones or any other communication device which has not been previously authorized in writing Statement to be signed by the studentI have read the text on academic integrity and I pledge not to have committed or attempted to commit academic fraud in this examinationSignedNote an examination copy or booklet without that signed statement will not be graded and will receive a final exam grade of zero Part I 50 Problems solving questionsPart II 50 Multiple choice questionsPart IQuestion 1 20 pointsThe riskfree interest rate is 5 and the expected return of a passive equity portfolio is 12 with standard deviation of 20 You wish to establish an active subportfolio then combine it with the passive portfolio to form an optimal portfolio You have a total of 100000 to invest You will invest 20 in riskfree asset and the rest in the optimal portfolioYou are examining the following three individual stocksStockExpected ReturnBetaResidual std devA02602507B02001606C0141130515 points Calculate the weights for the active portfolio110 points Calculate the alpha beta and residual standard deviation of the active portfolio15 points Determine the exact allocation in dollar term for every asset in the complete portfolioAnswerA0260 2500350700714290403587B0200 1600380601055560596413C0141 1300500Sum0176984w001011338w0112049Dollar Investment10000000 ActivePortfolioRiskfree Portion02Riskfree022000000PortflioPortfolioPortfolioPassive071036087103608alphbetaResidVarA00361773361773 0014110089690079813B0053462534620 002270954260128055C0000Sum10010000000 0036819632290207867std dev0455925Question 2Performance Attribution
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