ATTEND ONLY IF YOU CAN SOLVE ALL THE QUESTIONS TOGETHER. IF NOT I WILL REPORT YOUR ANSWER IF PARTLY ANSWERED.

Greta has risk aversion of A=3 when applied to return on wealth over a one-year horizon. She is pondering two portfolios, the S\&P 500 and a hedge fund, as well as a number of one-year strategies. (All rates are annual and continuously compounded.) The S\&P 500 risk premium is estimated at 9% per year, with a standard deviation of 23% . The hedge fund risk premium is estimated at 11% with a standard deviation of 38% . The returns on both of these portfolios in any particular year are uncorrelated with its own returns in other years. They are also uncorrelated with the returns of the other portfolio in other years. The hedge fund claims the correlation coefficient between the annual return on the S\&P 500 and the hedge fund return in the same year is zero, but Greta is not fully convinced by this claim. What should be Greta's capital allocation? (Do not round your intermediate calculations. Round your answers to 2 decimal places.)

Bond valuation and yield to maturity Personal Finance Problem Mark Goldsmith's broker has shown him two bonds issued by different companies. Each has a maturity of 4 years, a par value of $1,000, and a yield to maturity of 7.70%. The first bond is issued by Crabbe Waste Disposal and has a coupon interest rate of 6.327% paid annually. The second bond. issued by Malfoy Enterprises, has a coupon interest rate of 8.90% paid annually. a. Calculate the selling price for each of the bonds. b. Mark has $18,000 to invest. If he wants to invest only in bonds issued by Crabbe Waste Disposal, how many of those bonds could he buy? What if he wants to invest only in bonds issued by Malfoy Enterprises? c. What is the total interest income that Mark could earn each year if he invested only in Crabbe bonds? How much interest would he eam each year if he invested only in Malfoy bonds? d. Assume that Mark will reinvest all the interest he receives as it is paid and that his rate of return on the reinvested interest will be 9%. Calculate the total dollars that Mark will accumulate over 4 years if he invests in Crabbe bonds or Malfoy bonds Your total calculation will include the interest Mark gets, the principal he receives when the bonds mature, and all the additional interest he earns from reinvesting the coupon payments he receives