Exam 2 practice problems - 1

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End of Packet Problems 1. Assume that you are given the following historical data for Security Y. What is the coefficient of variation for Security Y? CVeE S/ ¢ Year Security Y 1 0.30 o 2 0.08 = o et 3 -0.10 S = O VSonlSiatel 4 0.05 5 0.19 : EV - .14 9 6bouy 2. Assume that you are given the following historical data for Security Y and the market on average What is the covariation between Security Y and the market? COViny coR < m CO\/Wb 2.6 .O~\ (p(o] N X Year Security Y Market 1 0.30 0.22 2 .. 0.08 0.10 3 -0.10 0.03 - 0.05 0.09 g -0 0.15 N 2056764111 CV\; = L.HU (oY COQ«:) 2 s\'\,(’-\ o =WV eTy) COR= 0«99 7300‘17'57 8 St #0:0N13039E CVerz 0.0 5N

e— o 3. Assume that security A has an expected return of 15% and a standard deviation of 9.6%. Given this information, determine the probability of observing a value between 18% and 25%. ! - P i O Fas)-Hed 5 15 16 as 0-8512... - O.6326... [o.228547 57 ] ® Z:= O-i8—0-55 = 0.?)"35 2O P2 0.2 N (to Hre [¢FH) Z- 0-35-045 — = L. oW (pppb) ©-0%( P> 0 8312163706 4. “How’d you do on Banko’s FIN3403 test?” Not bad. Out of the 100 possible points, I scored 73. Banko standardizes each exam score via Z- scores to a mean of 77.50% and a standard deviation of 12.5%. This just means that whatever your z-score was before the curve, your z-score will be the same after the curve as well... but with a different mean and standard deviation. The raw class average was 53.43%. And I think Banko said the standard deviation was 20% (out of 100). So, with the curve, my score is Raw . Curue - 5234 - - 13 5 > z = X <2775 Q.5 & i N [y 0.9785 - *- 1.5 1.5 X2 87.73[;25

1 5. You are given the following information concerning the returns for Security J over the coming year. Asyou can calculate, the standard deviation is 15.82 percent. Based on this inforrTlafion, d-'%, and assuming the actual distribution is normal, use the Z-table to calculate the probability that the o< actual return will be positive. = Qs | 589, State Probability Return J M 0.0\ 1 2000% | 0.30 20.00% | 0.08 7 60.00% 2 -0.10 7 — 0 o l.b% = X e " O -0,0l (D =z -——/: = = 2 "‘O.lougjg o o. 1583 =0 Llschm Cleft op Z Score) RIGEIE D Gods i S5 Loy, :'Ep.sqoaaﬂ 6. You are given the following information concernin el” year. Asyou can calculate, the standard deviation | O'CAL and assuming the actual distribution is normal, us actual return will be positive. g the returns for Security ] over the coming is 16.16 percent. Based on this information, e the Z-table to calculate the probability that the O = O. Il 33Ns State Probability Return] | M ool 9 1 21.30% 0.30 2 wil7:55% 0.08 < 61.15% -0.10 ® Bl o ot USing Voriancy P g:f%i‘l& TO.lo3g1511y Lo ( Vz02) 7 cagicmy k) =200 (- -y > _ o».»a\zgo,g- F)ﬂ ®1- 1S BIua = * o 185{(0.08-7) O.54\1 o5 5 = % C 2 [Camy(Lay , P T ‘”% o (155 ( '08) 5 V= O. oab‘&GQQS'ﬂ (.01555(-,‘3] 4—;,.;0.:0‘ i = Bt PV P r = O-O‘hmﬂﬂw L @2023 SHadvy RAma® Ot man

You are given the following information concerning the returns for Security J over the com-ing year. Asyou can calculate, the standard deviation is 15.82 percent. Based on this information, d-'%, and assuming the actual distribution is normal, use the Z-table to calculate the probability that the o< actual return will be positive. = Qs | 589, State Probability Return J M 2 0.0\ 1 2000% | 0.30 20.00% | 0.08 7 60.00% 2 -0.10 ', — 0 o l.b% = X s fi O -0,0l (D =z —_— il 0NV ST E= ©.1583 =0 Llschm Cleft op Z Score) RIGEIE D Gods i S5 Loy, :'Ep.sqoaaﬂ 6. You are given the following information concernin year. Asyou can calculate, the standard deviation and assuming the actual distribution is normal, us actual return will be positive. g the returns for Security ] over the coming is 16.16 percent. Based on this information, e the Z-table to calculate the probability that the o = O lbl3307S | Bk § 0 State Probability Return'J P ivp) 9} 1 21.30% 0.30 ZEN 2 “17.55% 0.08 e o ) 3 61.15% -0.10 Mz L% ? 2z (o0 VP fodusvtatte. - : 20, i ® B0l o ot USing Voriancy o oM ©. 10381511y e (0 vy D\ OUSBoIug < °SM\ 365197 ] = [Gay(.ay ("755) (.08) » V= (. 6185) (-, V] F = OIO‘hy it

Fall 2015 Exam 1 #20. Assume that you are given the following historical returns for Security A. Given this information, determine the coefficient of variation for Security A. Q - D—— = O, CV = z 321\ 087319 Year Return on Security A 20.00% ) — - 16.00% . X = 0.l 12.00% . G 15.00% | S = O.»O?,?,;waqjc' 12.00% o g o syl dar ks G B Wl N - . A. 0.1534 0.2211 C. 0.2888 D. 0.3565 E. 0.4242 Answer: B.

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