8:39 PM @ 10% Il cricket Done FIN 3302 Homework 3.docx Name(s): Hedar Ramirez-Villeda Each question in this homework carries 2 points. 1. You put up $50 at the beginning of the year for an investment. The value of the investment grows 4% and you earn a dividend of $3.50. What is your HPR? [Remember, HPR = Capital Gain Yield + Dividend Yield] = 4% + (3.50/50) =11% 2. Your investment has a 40% chance of earning a 15% rate of return, a 50% chance of earning a 10% rate of return, and a 10% chance of losing 3%. What is the standard deviation of this investment? E(T) = 0.46.15) +0.56.10)+0.1(-03) = 10.7% sa=0.46.15-107)2 +0.50.10-.107) 2 + 0.1(-.03-107) 2 = 0.002641 S = 5.14% 3. If you are promised a nominal return of 12% on a 1-year investment, and you expect the rate of inflation to be 3%, what real rate do you expect to earn? 1+.12=1.12 1.12/1.03 -1=8.74% 1+.03=1.03 4. The EagleEye Fund has an expected return of 16% and a standard deviation of 20%. The risk-free rate is 4%. What is the reward-to-volatility ratio for the EagleEye Fund? 5. You invest $1,000 in a complete portfolio. The complete portfolio is composed of a Treasury bill with a rate of return of 6% and a risky asset with an expected rate of return of 16% and a standard deviation of 20%. What percentage of your complete portfolio should be invested in the risky portfolio if you want your complete portfolio to have a standard deviation of 9%. (Hint: Look into the formulas in slide# 29 to solve this