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An investor seeks to create a portfolio from three types of securities: Treasury Bills (T), Corporate Paper (C), and Junk Bonds (J). The table lists the expected rates of return for the asset types and their average risk (on a 1-5 scale, where ‘5' denotes maximum risk). The investor seeks portfolio allocations (T + C + J = 1) that will maximize the expected return on her portfolio, while maintaining an overall risk of no more than ‘3'. Security Return (%) Risk Treasury Bills 2.5 2.0 Corporate Papers 5.0 2.5 Junk Bonds 8.0 5.0
(a) Formulate the investor's linear programming problem.
(b) Determine the investor's optimal portfolio allocation and the maximum expected return on her portfolio. (To determine the optimal portfolio allocation, you will need to use your constraints from part (a). To find the maximum expected return on her portfolio, use the objective function equation from part (a) and the optimal asset allocation.) (Hint: the two assets in the optimal portfolio are corporate papers and junk bonds)
A contractor has been chosen to perform a government project. To avert the moral-hazard risk that the contractor will behave inefficiently, government is considering how to use contractual incentives to avoid cost overruns. Government has a target..
We want to determine if the training program was effective. Give the hypotheses for this problem. Compute the test statistic. At 95% confidence, test the hypotheses. That is, did the training program actually increase the production rates
A monopolist's has a constant marginal and average cost of $10 and faces a demand curve of QD = 1000 - 10P. Marginal revenue is given by MR= 100 - 1/5Q. A. Calculate the monopolist profit maximizing quantity, price and profit.
Suppose households consume 80% of their disposable income. The government is considering three actions to help increase GDP: increasing government spending, cutting taxes, or increasing fixed transfer payments. If the government increases transfer..
In an effort to make gasoline more affordable for our population, the US government mandates that gasoline be priced at $3 per gallon, while the market price at present is $4 per gallon. What impact will this policy have on gasoline sales.
An advisory group decided to investigate this claim, believing it was too large. A sample of 200 traffic accidents this year showed 74 persons were also involved in another accident within the last five years.
Monopoly Rinks is the only ice skating facility in Mapleville. The next closest rink is about 100 miles away. It has determined that its demand curve is Q = 123 - 0.5P - 0.25 Pc + .01 Y where Q is the quantity of seasonal passes sold.
Blair has decided to manufacture the sub assemblies within the company and must now consider whether to rent one centerly located facility or to rent three separate facilities, each located near one of the assembly plants, where each facility woul..
Consider the market for ice cream as in the previous problem. This has a demand curve given by D(P)=100-P and a supply curve given by S(P)=1+98P. If the government implements a $9 tax, what is the price that consumers will pay
A country produces manufactured goods, whose industry is characterized by increasing returns to scale, monopolistic competition, and firms that differentiate their products. Firms are symmetric all firms have identical costs functions and demand f..
Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant at $50 per unit. The production function is F(L,K)=L^1/2*K^1/2 If the current capital stock is fixed at 1,600 units, how much labor should..
(a) How many people participate in the study (b) Calculate the Relative Frequency and enter the results in the above table. (c) Calculate the Midpoint for each class and enter the results in the above table. (d) Calculate the Cumulative Frequency and..
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