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Suppose that a security costs $3,000 today and pays off some amount b in one year. Suppose that b is uncertain according to the following table of probabilities: b: $3,000 $3,300 $3,600 $3,900 $4,200Probability: 0.1 0.2 0.3 0.2 0.2
(a) Calculate the return (in percent) for each value of b. (Note: You may just calculate the total return and not worry about how this is split between current yield and capital-gains yield.)
(b) Calculate the expected return (in percent).
(c) Calculate the standard deviation of the return.
(d) Suppose that an investor has a choice between buying this security or purchasing a different security that also costs $3,000 today but pays off $3,300 with certainty in one year. How is an investor's choice of which security to purchase related to his degree of risk aversion?
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On January 1 2011: C/D = 0.2 T/D = 1.8 ER/D = 0.3 MB = USD. 12000000 Required reserve ratio on checkable deposits = 0.10 Required reserve ratio on time deposits = 0.07 These ratios have been defined in class and are assumed constant.
During the current year, sales total $2,000,000, income is $84,700 per capita, advertising is $500,000, and competitor advertising is $300,000. Previous period levels were $77,000 (income), $400,000 (advertising), and $400,000 (competitor advertis..
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