Investment Analysis and Fundamentals Homework 1 This is the first homework. Below are five questions and each of them is worth 20 pts. (total is 100 pts.). The due date for the homework is 19.00 p.m on November 25 (next Wednesday). Please write your answers in Microsoft word if possible. Do not use handwriting or photos in the submitted answers. Note that submission later than due date is subject to a 10% penalty for each late day. 1) The following are the closing prices of IBM stock in U.S Nov. 9 115.53 Nov.10 117.91 Nov. 11 117.20 Nov.12 114.50 Nov.13 116.85 Calculate the HPR's and HPY's of each day given the information above 2) Given the example above; calculate the arithmetic mean of both the closing prices and HPY's. Also calculate the geometric mean (available in Excel) of closing prices and HPY'S 3) Calculate the variance and standard deviation of IBM in the example above both for closing prices and HPY's (with respect to arithmetic means) 4) An investor considers to buy this IBM stock. He/she tries to calculate the expected return and expected risk of IBM for the next six months by using the scenario below State Expected Return Prob. Good 60% 0.2 Mediocre 15% 0.6 Bad -25% 0.2 Then what is the expected return, expected variance and expected standard deviation in this question. 5) We have the following gamble. The gambler will receive $ 100 000 with a probability of 0.02 but nothing with a probability of 0.98. However; this person accepts our offer of $1500 and gets this money instead of playing the gamble. What is the risk preference of that investor? Investment Analysis and Fundamentals Homework 1 This is the first homework. Below are five questions and each of them is worth 20 pts. (total is 100 pts.). The due date for the homework is 19.00 p.m on November 25 (next Wednesday). Please write your answers in Microsoft word if possible. Do not use handwriting or photos in the submitted answers. Note that submission later than due date is subject to a 10% penalty for each late day. 1) The following are the closing prices of IBM stock in U.S Nov. 9 115.53 Nov.10 117.91 Nov. 11 117.20 Nov.12 114.50 Nov.13 116.85 Calculate the HPR's and HPY's of each day given the information above 2) Given the example above; calculate the arithmetic mean of both the closing prices and HPY's. Also calculate the geometric mean (available in Excel) of closing prices and HPY'S 3) Calculate the variance and standard deviation of IBM in the example above both for closing prices and HPY's (with respect to arithmetic means) 4) An investor considers to buy this IBM stock. He/she tries to calculate the expected return and expected risk of IBM for the next six months by using the scenario below State Expected Return Prob. Good 60% 0.2 Mediocre 15% 0.6 Bad -25% 0.2 Then what is the expected return, expected variance and expected standard deviation in this question. 5) We have the following gamble. The gambler will receive $ 100 000 with a probability of 0.02 but nothing with a probability of 0.98. However; this person accepts our offer of $1500 and gets this money instead of playing the gamble. What is the risk preference of that investor
