UGBA 103
Final Exam
PRACTICE EXAM I
Time: 3 hours
Name:
Student id#:
Note: Throughout the exam, assume that there are no frictions, i.e., perfect capital
markets, information is immediately incorporated into stock prices, there is no spread
m
between borrowing and lending rates, etc. If nothing else is stated, assume that everything
er as
is in real terms. Also, if nothing else is stated, do not consider taxes. If you think that you
co
need to make additional assumptions, please specify these.
eH w
o.
Circle your final numerical answers!
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000805705997 from CourseHero.com on 11-12-2021 21:10:36 GMT -06:00
1
https://www.coursehero.com/file/9940389/PRACTICE-EXAM-I/
, 1. Portfolio choice: The following table shows the possible returns for two
stocks, i and j, in different states of the world. Here, pij denotes the
probability for stock i returning ri and stock j returning rj.
Returns rj 0% 20% 30%
ri pij
10% 30% 0% 0%
30% 0% 20% 20%
50% 0% 20% 10%
Hint: Notice that there are only 5 states of the world for which the probability to
occur is greater than 0.
a) (5 points) Calculate expected return of stock i and j respectively.
m
er as
co
b) (5 points) Calculate the standard deviation of stock i ’s and j’s returns
eH w
respectively.
o.
rs e
ou urc
c) (5 points) The correlation coefficient between stock i’s and j’s return is 0.76.
Calculate the standard deviation of the return of a portfolio of 40% in stock i and
o
60% in stock j.
aC s
vi y re
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000805705997 from CourseHero.com on 11-12-2021 21:10:36 GMT -06:00
2
https://www.coursehero.com/file/9940389/PRACTICE-EXAM-I/
Final Exam
PRACTICE EXAM I
Time: 3 hours
Name:
Student id#:
Note: Throughout the exam, assume that there are no frictions, i.e., perfect capital
markets, information is immediately incorporated into stock prices, there is no spread
m
between borrowing and lending rates, etc. If nothing else is stated, assume that everything
er as
is in real terms. Also, if nothing else is stated, do not consider taxes. If you think that you
co
need to make additional assumptions, please specify these.
eH w
o.
Circle your final numerical answers!
rs e
ou urc
o
aC s
vi y re
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000805705997 from CourseHero.com on 11-12-2021 21:10:36 GMT -06:00
1
https://www.coursehero.com/file/9940389/PRACTICE-EXAM-I/
, 1. Portfolio choice: The following table shows the possible returns for two
stocks, i and j, in different states of the world. Here, pij denotes the
probability for stock i returning ri and stock j returning rj.
Returns rj 0% 20% 30%
ri pij
10% 30% 0% 0%
30% 0% 20% 20%
50% 0% 20% 10%
Hint: Notice that there are only 5 states of the world for which the probability to
occur is greater than 0.
a) (5 points) Calculate expected return of stock i and j respectively.
m
er as
co
b) (5 points) Calculate the standard deviation of stock i ’s and j’s returns
eH w
respectively.
o.
rs e
ou urc
c) (5 points) The correlation coefficient between stock i’s and j’s return is 0.76.
Calculate the standard deviation of the return of a portfolio of 40% in stock i and
o
60% in stock j.
aC s
vi y re
ed d
ar stu
is
Th
sh
This study source was downloaded by 100000805705997 from CourseHero.com on 11-12-2021 21:10:36 GMT -06:00
2
https://www.coursehero.com/file/9940389/PRACTICE-EXAM-I/
