A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and a sensitivity of -2 to HML. The portfolio has earned 16% return. What was the abnormal return on the portfolio, if the risk free rate was 0%, market's excess return was 8%, the SMB factor premium was -10% and the HML factor premium was -4%?

A portfolio has a market beta of 0.8, a factor loading of 1 to SMB and a sensitivity of -2 to HML. The portfolio has earned 16% return. What was the abnormal return on the portfolio, if the risk free rate was 0%, market's excess return was 8%, the SMB factor premium was -10% and the HML factor premium was -4%?

1.

Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. Then the consumption function is given by

2.

Suppose that the MPC is equal to 0.8 and autonomous consumption spending is 400. At what level of income is saving = 0?

3.

The saving function

2. Use the Holt’s approach.

1. Determine the best value of alpha and gamma. Show your work on a spreadsheet.
   
2. Use L₂₅ andT₂₅ from the template of the model you obtained in question ‘5’ to calculate the forecast for months 26, 27, and 28. If you could not get the optimal alpha and gamma, use instead alpha = 0.8 and gamma = 0.2 to obtain L₂₅ and T₂₅, and now calculate the requested forecasts. Show your calculations.
   
3. As a matter of policy, management will approve borrowing up to a total of $2,000,000 a month (which, in our data set, will be a value of 2000 since the data appear in thousands). For next month (month 26), how confident can management be that all the demand will be met (that is predicted sales will not exceed $2,000,000)? You can use trial and error, or goal seek with the template.

See data in the next page.

17. A portfolio consists 20% of a risk-free asset and 80% of a stock. The risk-free return is 4%. The stock has an expected return of 15% and a standard deviation of 30%. What’s the expected return

A. 12.8%

B. 9.5%

C. 15.0%

D. 4.0%

18. The stock of Alpha Company has an expected return of 0.10 and a standard deviation of 0.25. The stock of Gamma Company has an expected return of 0.16 and a standard deviation of 0.40. The correlation coefficient between the two stock’s return is 0.2. If a portfolio consists of 40% of Alpha Company and 60% of Gamma Company, what’s the expected return of the portfolio?

A. 0.126

B. 0.136

C. 0.160

D. 0.130

19. You have the following data on the securities of three firms: Return last year Beta Firm A 10% 0.8 Firm B 11% 1.0 Firm C 12% 1.2 If the risk-free rate last year was 3%, and the return on the market was 11%, which firm had the best performance on a risk-adjusted basis?

A. Firm A

B. Firm B

C. Firm C

D. There is no difference in performance on a risk-adjusted basis

20. An investor has $10,000 invested in Treasury securities and $15,000 invested in stock UVW. UVW has a beta of 1.2. What is the beta of the portfolio?

A. 0.00

B. 0.72

C. 1.20

D. 1.60

Better Mousetraps has developed a new trap. It can go into production for an initial investment in equipment of $6.3 million. The equipment will be depreciated straight line over 6 years to a value of zero, but in fact it can be sold after 6 years for $695,000. The firm believes that working capital at each date must be maintained at a level of 10% of next year’s forecast sales. The firm estimates production costs equal to $1.80 per trap and believes that the traps can be sold for $7 each. Sales forecasts are given in the following table. The project will come to an end in 6 years, when the trap becomes technologically obsolete. The firm’s tax bracket is 35%, and the required rate of return on the project is 11%. Use the MACRS depreciation schedule.

a. What is project NPV? (Negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in millions rounded to 4 decimal places.)

b. By how much would NPV increase if the firm depreciated its investment using the 5-year MACRS schedule? (Do not round intermediate calculations. Enter your answer in whole dollars not in millions.)

For all problems below, use correct notation where appropriate.
Round all proportions to 3 d.p. and standard errors to 4 d.p.
1. (up to 5 EC pts) Do we dream in color? In the 1940s, before the age of television,
color movies, and video games, 29% of the American population reported dreaming in
color. A psychologist suspects that the present-day proportion might be higher, now
that we are surrounded with color imagery. In a random sample of 113 people, 92
reported dreaming in color (Schwitzgebel 2003).
a) State the parameter to be tested. Be specific and use the appropriate notation.
b) Conduct a hypothesis test to determine if the psychologist’s suspicion is
correct. Clearly show all 7 steps as shown in the lecture notes. Complete each
step by hand. Be sure to state the hypotheses in words and symbols.
c) In the context of this problem, what would it mean if we made a Type I error?
What is the probability of making this kind of error? (See 8.1,8.2 lecture notes.)

In 2 paragraphs discuss the concepts of Employment Equity and Diversity Management. How will you apply these concepts to the hotel you are supervising and the staff you hire?

identify 2 BFOQ’s for the job of room attendant