1) Sharpe Ratio (20 points):

i) Similar to what we did in class, please use the DAX data provided to calculate the Sharpe Ratio.

Assume that the risk free rate is the 1-Year LIBOR rate of 1.78%. Please provide the following

components of your calculation as well as attach your excel sheet, round to at least two decimals: (2 point

each, no excel sheet no points):

Daily Volatility: _______

Average Daily Return:________

Annualized Volatility: ________

Annualized Return:________

Sharpe Ratio:_ ____________

iii) If you were an active asset manager, would you want to invest solely in the DAX based on this Sharpe

Ratio? Why or why not? (4 pts)

iv) Why do we subtract the LIBOR from the average return (4 points)?

v) When converting for annualized return what conversion formula do you use? For converting volatility

what formula do you use (4 points)?

FIN 443 | Fall 2017 | Homework 2

2) Efficient Frontier (28 points):

Similar to what we performed in class, please use the data in the Homework 2 - MVO Data to answer the

following. Please attach your excel worksheet.

a) Calculate the Annualized Return and Annualized Volatility for each of these names (6 points):

b) Assuming the risk free rate, what is the Sharpe Ratio of 992 HK assuming a 0.75% risk free rate (2

point)?

c) make covariance matrix, the complete symmetrical one (remember alt, e, s, e?) using excel data

analysis tools and paste here (do you remember what you need to add in excel?) (2 point):

d) Now comes the fun part. Time to use the Solver function. I would like to know the following:

i) In the solver, what is going to be our objective when trying to determine the most efficient portfolio

(what is that target cell, and what are we doing with it) (1 point)?

ii) Why do we have a constraint that has all the assets equaling one (1 point)?

iii) The weights of all the components at the GMV (4 points)

iv) The following data about the portfolio at the maximized Sharpe Ratio (1 point each):

Daily Volatility: ________ + or - 0.2%

Average Dailly Return:________+ or - 0.2%

What was the holding period again:_______

Annualized Volatility: _________+ or - 0.50%

Annualized Return:________+ or - .50%

Sharpe Ratio:_____ __________+ or - 0.02

v) Determine the annual volatility level for the following returns (8%, 10%, 12%) (6 points):

vi) Include your excel workbook to produce these answers, with working formulas (zero for entire

problem if no excel provided).

3) Bloomberg Related Questions

i) If I wanted to download a set of analyst research reports for a particular security, what function would I

use? (1 pt)

ii) We have discussed PORT and PRTU. Why do you need to use both functions? (1 pt)

FIN 443 | Fall 2017 | Homework 2 1) Sharpe Ratio (20 points): i) Similar to what we did in class, please use the DAX data provided to calculate the Sharpe Ratio. Assume that the risk free rate is the 1-Year LIBOR rate of 1.78%. Please provide the following components of your calculation as well as attach your excel sheet, round to at least two decimals: (2 point each, no excel sheet no points): Daily Volatility: _______ Average Daily Return:________ Annualized Volatility: ________ Annualized Return:________ Sharpe Ratio:_ ____________ iii) If you were an active asset manager, would you want to invest solely in the DAX based on this Sharpe Ratio? Why or why not? (4 pts) iv) Why do we subtract the LIBOR from the average return (4 points)? v) When converting for annualized return what conversion formula do you use? For converting volatility what formula do you use (4 points)? FIN 443 | Fall 2017 | Homework 2 2) Efficient Frontier (28 points): Similar to what we performed in class, please use the data in the Homework 2 - MVO Data to answer the following. Please attach your excel worksheet. a) Calculate the Annualized Return and Annualized Volatility for each of these names (6 points): b) Assuming the risk free rate, what is the Sharpe Ratio of 992 HK assuming a 0.75% risk free rate (2 point)? c) Create a covariance matrix, the complete symmetrical one (remember alt, e, s, e?) using excel data analysis tools and paste here (do you remember what you need to add in excel?) (2 point): FIN 443 | Fall 2017 | Homework 2 d) Now comes the fun part. Time to use the Solver function. I would like to know the following: i) In the solver, what is going to be our objective when trying to determine the most efficient portfolio (what is that target cell, and what are we doing with it) (1 point)? ii) Why do we have a constraint that has all the assets equaling one (1 point)? iii) The weights of all the components at the GMV (4 points) iv) The following data about the portfolio at the maximized Sharpe Ratio (1 point each): Daily Volatility: ________ + or - 0.2% Average Dailly Return:________+ or - 0.2% What was the holding period again:_______ Annualized Volatility: _________+ or - 0.50% Annualized Return:________+ or - .50% Sharpe Ratio:_____ __________+ or - 0.02 FIN 443 | Fall 2017 | Homework 2 v) Determine the annual volatility level for the following returns (8%, 10%, 12%) (6 points): vi) Include your excel workbook to produce these answers, with working formulas (zero for entire problem if no excel provided). 3) Bloomberg Related Questions i) If I wanted to download a set of analyst research reports for a particular security, what function would I use? (1 pt) ii) We have discussed PORT and PRTU. Why do you need to use both functions? (1 pt)