Slide 1

• 1. Two-coin-flip strategy that pays off like this: HH +150, TT -100, HT or TH +120, every day for a year. Calculate the most you would pay for this strategy if you require a Sharpe ratio of 1.0 (and the riskfree interest rates are zero).

2.Do the same as above (most you would pay for a Sharpe of 1.0) for a two-dice-roll strategy that returns $3 for a 3, $4 for a 4, ..., $12 for a 12, or -$20 for snake eyes, every day for a year.