ECON 106F Lecture Notes - Lecture 11: Capital Asset, Sharpe Ratio, Systematic Risk

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ivorykangaroo452

31 Dec 2016

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We can describe a portfolio by its portfolio weights- the fraction of the total investment in the portfolio held in each individual investment in the portfolio. Xi =(cid:2932)a(cid:2922)(cid:2931)(cid:2915) (cid:2925)(cid:2916) i(cid:2924)(cid:2932)(cid:2915)(cid:2929)(cid:2930)(cid:2923)(cid:2915)(cid:2924)(cid:2930) i (cid:2930)(cid:2925)(cid:2930)a(cid:2922) (cid:2932)a(cid:2922)(cid:2931)(cid:2915) (cid:2925)(cid:2916) (cid:2926)(cid:2925)(cid:2928)(cid:2930)(cid:2916)(cid:2925)(cid:2922)i(cid:2925) each is worth per share. The value of the investment is the number of shares in that investment multiplied by how much. These portfolio weights always add up to 1 so that they represent the way we have divided our money between the different individual investments in the portfolio. Given the portfolio weights, we can calculate the return on the portfolio- it is the weighted average of the returns on the investments in that portfolio (the weights correspond to portfolio weights) Each return is the new share price over the old share price - 1. The expectation of a sum is just the sum of the expectations and the expectation of a known multiple is just the multiple of its expectation.

Related Questions

This business decision looks at the impact an externality has on an Investment Choice.

A dynamic externality occurs when (as a group) our animals impose a cost on the future provision of the good produced in the commons, which are; we can cause environmental damage through overgrazing.

There is one pasture we share in commonâthere are just the two of us using the pasture.

On this pasture, milk production as a function of total herd size is as follows:

# of animals	Liters of milk produced
0	0
5	10
10	20
15	30
20	36
25	40
30	44

As you can see, the amount of milk produced increases with the size of the herdâhowever, it increases at a decreasing rate.

For each livestock owner, the share of this total milk produced they receive is a function of your share of the total herd. The Price of milk is $1 per liter.

For each animal put on the pasture, it costs $1 in private labor costs. (5 animals costs $5, 10 animals costs $10,â¦)

So if I have 5 animals and you have 5 animals, my payoff is (5/10)*20-5, or 5. If you had 15 animals and I had 5, then it is (5/20)*36-5, or 4.

A) given no market intervention, what is the Nash Equilibrium of # of animals and Liters of milk if there are two farmers?

B) What is the Pareto Optimal Equilibrium?

C) What would each investor need to do to create the Optimal Equilibrium? Show your work on all answers!

D) This is an arithmetic questionâit does not require extremely high level math. If the government wished to maximize its tax revenue on Milk, how much would it charge given the information provided in the introduction (noteâyou will create a new equilibrium)?

limecicada459

note all the things that could be improved with the denial email.

Denial Request for Discussion (Adapted from connect.thomsonlearning.com)

Dear Rich,

Out of the 97 books you returned to us, only 25 are acceptable. Our return policy is very specific as to the condition the books must be in before we will accept them. Some of the books you sent did not even come close to meeting our return conditions. It costs us extra time to go through boxes of unacceptable books; it costs you extra money to send them to us and then pay again to have them returned to you.

In each book order we include a copy of our return policy. Attached is an extra one for you to put near the place you sort books. As you can see, it states that we give 100 percent credit on some books. But they have to be returned in saleable condition. That means they must be new and have no marks inside them. They have to be returned within 12 months of the original invoice. For old editions, returned books will not be accepted if they are not within 90 days of our announcement of a new edition. Returned books must also be returned with a copy of the original invoice.

You returned 31 copies of Hefferman's College Writing Handbook, 2^nd edition. We couldn't accept this return because we announced its third edition 14 months ago. Donner's Introduction to Marketing (22 copies) could not be accepted because they were imprinted with your bookstore name and price on the inside cover. You also sent 14 copies of books from various authors, but we can't give credit for these copies because we did not publish them.

Although you have a good record of placing orders and paying on time, this return shipment had many problems. Despite the large number of unacceptable returns, we are crediting your account for $626.25. This is for 25 copies of Miller's The Promotable Woman at a price of $31 each. We charged a 15 percent restocking fee plus $32.50 shipping for returning the unacceptable books.

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1.US manufacturers receive news that profits from current-period investments will be taxed at a higher rate. What effect will this have on the present US current account deficit? NOTE: A decrease in the current account deficit means the current account becomes less negative.

A. The current account deficit will likely decrease (become less negative)

B. The current account deficit will likely increase (become more negative)

C. This will have no effect on the US current account deficit

D. It's impossible to tell what effect this will have on the US current account deficit

2.Which of the following would be consistent with the hypothesis that US productivity growth is causing trade deficits:

A. Increases in stock prices over and above current earnings

B. Increased consumption as a ratio of GDP

C. Both

D. Neither

3.Evaluate the following statement using the model of trade deficits we learned in class: "Our country's trade deficit means that future generations will have to pay other countries back and will have less to consume than if we ran a balanced trade account". This statement is

A False: we can renege on our debts if they become too high.

B True: trade deficits means absolutely less consumption in future periods

C False: while in the future we will have to run trade surpluses if we run a trade deficit in the current period, increased investment means our absolute future consumption may be higher.

D True: trade deficits shift the share of consumption towards the current period and therefore the absolute consumption level in the future must be lower.

4.If a basket of goods in Home costs PH and PF in Foreign, and E is the price of the home currency in terms of the Foreign currency, which of the following is the Purchasing Power Parity equation?

A. PH = PF * E

B. PH / E = PF

C. PH * E = PF

D. PH / PF = E

blackminnow717

ECON 106F Lecture Notes - Lecture 11: Capital Asset, Sharpe Ratio, Systematic Risk

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