a. Write down the formula used to calculate the Present Value
(PV) of a future Cash Flow (CF)
for ‘n’ years. Using this formula, explain why the price of a
coupon bond and the yield to maturity are negatively
related.
b. If there is an increase in interest rates, which would you
rather be holding, long-term bonds or short-term bonds? Why? Which
type of bond has the greater interest-rate risk?
Could you explain why CAPM a good model to explain for
estimation or not? please, write out the reasons with specific real
world examples not your imagination.
Describe CAPM and how it can be used to to manage portfolio
risk...?
How is CAPM used by investors to manage portfolio risk as well
as how they can create portfolios tailored to the investors exact
risk tolerance level..?
Include Sources... Base answers upon the work of Markowitz and
Sharpe/Litner..
Write down the null hypothesis.
Write down the alternative hypothesis.
Explain why you chose your hypotheses as such.
Do a hypothesist test of your data at the α = 2% level of
significance for the population proportion by carrying out the
following five steps:
View an example of how to use StatCrunch to compute the value
Zα
If it is a left-tailed test, what is the critical value,
-z0.02?
If it is a right-tailed test, what is the critical value,...
Answer the following question about beta and CAPM and explain
why.
a. If the CAPM holds (market portfolio could be used to compute
betas for specific projects/firms), it does not matter whether you
invest in one stock or in a portfolio of stocks. All stocks are
fairly priced (markets are efficient) and you will receive the
appropriate compensation for the risks that you bear. True or
false?
b. Suppose the CAPM holds. If two stocks have the same
correlation with...
Problem 3 Gauss Markov Theorem
(i) Write down the formula for the standard error of the OLS estimate, , from a multiple linear regression.
(ii) In your answer io part (i), what is ? What is the íurmla for
(iii) State the Gauss Markov Theorem, including the assumptions (i.e., write E[u|x1,...,xk] not MLR4)