06-09章习题.docVIP

Chapter 06 1. Consider a risky portfolio. The end-of-year cash flow derived from the portfolio will be either $70,000 or $200,000 with equal probabilities of .5. The alternative riskfree investment in T-bills pays 6% per year. a. If you require a risk premium of 8%, how much will you be willing to pay for the portfolio? b. Suppose that the portfolio can be purchased for the amount you found in (a).What will be the expected rate of return on the portfolio? c. Now suppose that you require a risk premium of 12%. What is the price that you will be willing to pay? d. Comparing your answers to (a) and (c), what do you conclude about the relationship between the required risk premium on a portfolio and the price at which the portfolio will sell? Use the following data in answering questions2,3, and 4. 2. Based on the utility formula above, which investment would you select if you were risk averse with A = 4? a.1 b. 2 c. 3 d. 4 3.Based on the utility formula above, which investment would you select if you were risk neutral? a. 1 b. 2 c. 3 d. 4 4. The variable (A) in the utility formula represents the: a. investor’s return requirement. b. investor’s aversion to risk. c. certainty equivalent rate of the portfolio. d. preference for one unit of return per four units of risk. Chapter 07-09 1. Consider the following information about a risky portfolio that you manage, and a risk-free asset: E(rP) =11%, P = 15%, rf = 5%. a. Your client wants to invest a proportion of her total investment budget in your risky fund to provide an expected rate of return on her overall or complete portfolio equal to 8%. What proportion should she invest in the risky portfolio, P, and what proportion in the risk-free asset? b. What will be the standard deviation of the rate of return on her portfolio? c. Another client wants the highest return possible subject to the constraint that you limit his standard deviation to be no more than 12%. Which client is more risk averse? Use t