Question

FORMULA SHEET TO BE DISTRIBUTED WITH THE EXAM 10000-p 360 2. r-. 10000-P 365 3. Rafter tax-Rbefore tax(1-Tax rate) 1/N 6. Variance sp(s)fr(s) - E(r)]2 7. Standard Deviation - (Variance)0.5 8. Sharpe ratio((rp)-r)/op N-P-Loan 10. Margin-Equity in Account Market Value of Position 1 Short Sale Margin- Cash in) (Sale Proceeds)-N.P After Exam#19 12- Tp-win + w2T2 P12 CorrelationCv 16. Individual stock: σ-p?αχι + σ2 (e.) 17. Portfolio: σ-β σ 18. Ri-αϊ + β,RM + e, where Ri-ri-Tj and RM-TH-Tj 19. CAPM: E)BCE(rM)-) aM 21. Bportfolio WABA+ WBB 22. Multi-factor APT: E(rp)P [E()P[E()-rtE(r) r 23. Stock Price Dividend perpetuity Expected return of stock

Please tell me which formulas you use.

Answer 1

Formulaes used are:

Cov(r 14, P12-Correlation = cov(nn 15. Covar Cov(r,r2)-

For Stock Fund For Bond Fund For Stock Fund For Bond Fund pl(r,-E(n)][ra-E()] 1 Prob Stock fund (1) Bond fund (2) Pi*(Xi-x))2 Pi(Xi-(x))2 (Xi-E(x)) (Xi-E(x)) 0.05 0.25 0.4 0.3 37% 11% 14% 30% 10.00% 0.03471 0.1863062 47.00% 21.00% 4.00% 20.00% 15.0500% 1.9500% 8.9500% 11.0500% -996 15% 5% 6.05% 0.00809475 0.089970829 0.011045 0.001132513 0.011025 9.50625E-05 0.0032041 0.012 0.003663075 0.00353675 0.00102375 0.001432 0.00663 -0.002685 4 0.00064 6 Expected return 7 Variance 8 Standard Deviation Covariance- Correlation- 0.160182572

For Bond FundFor Stock pi"(X-E(x))^2 For Bond Fund pr-EC-E(2) 1 Prob 2 0.05 3 0.25 4 0.4 5 0.3 6 Expected return SUMPRODUCT(A2:A5,B2:B5) -SUMPRODUCT(A2:A5,C2:C5) 7 Variance 8 Standard Deviation-B70.5 Stock fund (1) 0.37 0.11 0.14 0.3 Bond fund (2) 0.09 0.08 0.15 0.05 For stock Fund Pi"(Xi-E(x))^2 Fund (X-E(x)) (Xi-E(x)) AS (B5-SB$6)42 Covariance = -SUM(H2:H5) SUM(D2:D5) -SUM(E2:E5) Correlation H6/(B8 C8)

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