Two companies, ABC and XYZ, are considering entering into a swap. Company ABC can
borrow at a fixed rate of 8.1% or, alternatively LIBOP + 1.3%. Company XYZ faces a fixed rate of
7.5% and a floating rate of LIBOR + 0.3%.
a) Suppose that company ABC wants a floating rate loan, while company XYZ wants a
fixed rate loan. Is there a basis for a swap? If so, set up the swap under the assumption
that interest rate savings is split evenly by the firms.
b) Answer the same question under the assumption that company XYZ wants a floating
rate loan, while company ABC wants a fixed rate loan.

A portfolio of $ 100,000 is composed of two assets: A stock whose expected annual return is 10% with an annual standard deviation of 20%; A bond whose expected annual return is 5% with an annual standard deviation of 12%. The coefficient of correlation between their returns is 0.3. An investor puts 60% in the stock and 40% in bonds.

What is the expected annual return, standard deviation of the portfolio

What is the 1-year 95% VaR? Explain in non-technical terms the meaning of the number you calculated.

What is the 1-year 99% VaR? Explain in non-technical terms the meaning of the number you calculated

Discuss the weaknesses of Value-at-Risk as a measure of risk.

n a recent 5-year period, mutual fund manager Diana Sauros produced the following percentage rates of return for the Mesozoic Fund. Rates of return on the market index are given for comparison.

a. Calculate (a) the average return on both the Fund and the index, and (b) the standard deviation of the returns on each. (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. Did Ms. Sauros do better or worse than the market index on these measures?

Suppose the risk free rate is 4%, the expected rate of return is 8% and the variance of a portfolio is estimated as 500%. What is the slope of the Capital Allocation Line? Interpret the meaning of your estimation of the slope. [see p.168 of your text]

Imagine that the expected returns that are associated with an investment are 0.06, 0.08, 0.094, 0.12 and 0.134. If the standard deviations that are associated with the returns are 0, 0.022, 0.066, 0.154, and 0.176 respectively, what is the investor’s utility function? [see p. 159, pp.170-171 of your text]

Plot the utility function of the investor on a scale of 0, 0.1, 0.2, 0.3, and 0.4 for additional credit.

A laser beam of intensity I irradiates at normal incidence a face of area A of a cubical sample of intrinsic silicon of volume V. The photons from the laser beam are absorbed uniformly throughout the Si sample.

(i) If the quantum efficiency of intrinsic Si is ?, determine an expression for the electron-hole pair generation rate in the Si sample.   

(ii) Determine an expression for the excess carrier concentration, ??, under steady state conditions.

(iii) Calculate the ratio of the conductivity under illumination, ?light, to the conductivity without illumination, ?dark, for a Si sample of V =1 cm3,

A = 1 cm2, I = 1 mW cm-2, ? = 632.8 nm and ? = 0.3.

Stock Xillow has an expected return of 16% and a standard deviation of 4%. Stock Yash has an expected return of 12% and a standard deviation of 3%. Assume you have constructed a portfolio consisting of 75% weight in Stock Xillow and 25% in Stock Yash. Furthermore assume that the stocks have a correlation coefficient of -0.3. What is the standard deviation of the portfolio? A. Less than 2% B. Greater than or equal to 2% and less than 2.5% C. Greater than or equal to 2.5% and less than 3% D. Greater than or equal to 3% and less than 3.5% E. Greater than or equal to 3.5%

An experiment has 5 treatments; 6 replicates were obtained for each of the treatments. Use the treatments below to solve

A) Do the ANOVA computations on this data; what is the P-value?

B) On the basis of this P-value, do you reject the hypothesis that the means of the 5 treatments are the same at an α = 0.05confidence level?

A battery pack used in a medical device needs to be recharged about every 5 hours. A random sample of 20 battery packs is selected and subjected to a life test. The average life of these batteries is 5.05 hours with standard deviation ?=0.3 hours. Assume that battery life is normally distributed. Is there evidence to support the claim that mean battery life is more than 5 hours? Use ?=0.01.

a. Use P-value approach to test the hypothesis.
b. Use t-test to test the hypothesis.
c. Use confidence interval to test the hypothesis

d. If the true mean life is 5.1 hours, what is the type II error?

:    A concert promoter needs to decide how many concert T- shirt to order supplied with          its logo name on the front side of T-shirt. The profit on each one sold at the concert is 50 L.E. and any unsold T-shirt and returned to the supplied company will cause a loss of 30 L.E for the promoter. Demand is uncertain but is estimated to be between 200 to 1000 T-shirt. The probabilities of different demand levels are as follows:

Demand Level             200             400            600           800       

       Probability              0.2               0.3               0.4           0.1

How many T-shirt should the promoter order to get the higher profit and the least loss?

The following table shows the quarterly demand in thousands of cases, for a national beer distributor over the past four years. This data is also available in an Excel spreadsheet on Blackboard.

1.                                                                                         Using a smoothing coefficient of a = 0.3, exponentially smooth the series. Assume an initial forecast for the first quarter of 2015 of 300. Show:

- the MAD and MAPE

- a plot of the actuals and forecast on a properly labeled chart.

- the forecast for the first quarter of 2019.