Erman Krbeygirli

13352
Assignment 8

Ch10.7)
Average return for X= (0.15+0.23-0.34+0.16+0.09)/5 = 0.580= 5.80%
Average return for Y=(0.18+0.29-0.31+0.19+0.11)/5= 0.920= 9.20%
Variance of X= 1/(5-1). (0.15-0.058)2+(0.23-0.058)2+(-0.34-0.058)2+(0.16-0.058)2+(0.09-0.058)2
= 0.51970
Variance of Y= 1/(5-1). (0.18-0.920)2+(0.29-0.920)2+(-0.31-0.920)2+(0.19-0.920)2+(0.11-0.920)2
=0.54620
STDEV of X= (0.0051970)1/2 = 0.2280 = 22.80%
STDEV of Y= (0.054620)1/2 =0.2337 = 23.37%

Ch10.13)
Price of bond today = 1000/(1.09)29 =$82.15
Return = (82.15-77.81)/77.81= 0.0558 = 5.58%

Ch10.23)
Price of bond today = 70.[1-1/(1+0.08)6/0.08)]+1000/1.086 =953.77
Nominal return= (953.77-943.82+70)/943.82= 0.0847 = 8.47%
Real return= (1.0847/1.0481)-1= 0.0350 = 3.50%

Ch 11.6)
E(stock A)= (0.15).(0.06)+(0.65).(0.07)+(0.20).(0.11)= 0.0765 = 7.65%
E(stock B)= (0.15).(-0.20)+(0.65).(0.13)+(0.20).(0.33)= 0.1205 = 12.05%
Variance of stock A= 0.15(0.06-0.0765)2+(0.65)(0.07-0.0765)2+(0.20)(0.11-0.0765)2= 0.00029
Stdev of stock A = (0.00029)1/2 = 0.0171 = 1.71%
Variance of stock B=0.15(-0.20-0.1205)2+(0.65)(0.13-0.1205)2+(0.20)(0.33-0.1205)2 = 0.02424
Stdev of stock B= (0.02424)1/2 = 0.1557 = 15.57%
Covariance of A,B=(0.5)2(0.0171)2+(1-0.5)2(0.1557)2+2.(0.5)(1-05)(0)(0.0171)(0.1557)=0.00613
Correl coefficient= 0.00613/(0.0171)(0.1557)=2.302373