1) Janice wants to buy stock A whose return shows a mean of 2% and a standard deviation of 4% based

on 250 daily returns. At the .05 level of significance (or 95% confidence level), she would like to test if

the stock's daily return is equal to 5%. (a) write out the null and alternative hypothesis. (b) Compute

the test statistic. (c) Should she reject or fail to reject the null hypothesis?

2). A 130/30 trading strategy means shorting an asset up to 30% of the portfolio value and then taking the funds to long positions on other assets. Consider a 130/30 portfolio that is 70% SDS, -30% TBT,and 60% EEM. Compute the mean, standard deviation, skewness, and Sharpe Ratio of this portfolio. Compare this portfolio to the one in C.,

Question :what do you observe?