4. Assume that a risk-free money market account is added to the market described in Q2. The continuously compounded rate of return on the money market account is 0% per period. (i) Use the method of Lagrange multipliers to determine the proportions of wealth invested in the three assets available for the minimum variance portfolio with expected return u. Your answer must express the proportions as a function of μ. (ii) Recall that the market portfolio has highest Sharpe ratio. Formulate the optimi- sation problem which characterises the market portfolio. You don't have to solve this optimisation problem.
Q: If the market demand is given by Q = 20 - P and the marginal cost is constant at 8, what is the…
A: The objective of this question is to find the profit-maximizing monopoly price and output given the…
Q: Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care…
A: The objective of the question is to identify the consequences of present bias. Present bias refers…
Q: 2) You are in a perfectly competitive market with the following short run total cost function: TC =…
A: The short-run total cost function of a perfectly competitive firm is…
Q: The solution should be ai free The Marshall-Lerner condition for an effective devaluation…
A: BOP stands for Balance of Payments in economics. A meticulous account of every economic transaction…
Q: (a) Price can affect the aggregate supply curve (AS). Can you identify factors other than price that…
A: Aggregate supply (AS) refers to the total quantity of goods and services that producers in an…
Q: No ai answer pls Explain the basic idea of the expenditure multiplier and the role consumers' play
A: The expenditure multiplier is a concept in macroeconomics that measures the impact of adjustments in…
Q: Suppose that the British economy produces two goods: laptops and books. The quantity produced and…
A: The year, quantities produced and prices are provided below.YearQuantities ProducedPrice2015Laptops…
Q: Demand: D(p) = q = 200 - 9p and Supply: S(p) = q = 40 + 15p a.) Assume there are no taxes imposed.…
A: Demand is the desire of an individual ability and willingness to pay for a product. The demand is…
Q: The marginal propensity to consume out of permanent income equals 0.9 and the marginal propensity to…
A: Economic analysis is the process of evaluating data and patterns to better understand economic…
Q: Problem 2. Suppose the true value of vitamin C for consumers is $10/bottle. Of the 150 consumers,…
A: The analysis revealed a substantial impact of consumer information on market efficiency. Initially,…
Q: Consider a market with aggregate demand given by 1000 - 100p. Suppose that there are 10 competitive…
A: The market is competitive.Aggregate Demand function: 1000-100pNumber of firms in the market = 10Cost…
Q: Create three diagrams for the aggregate expenditures (AE) model for a public closed economy by…
A: The Aggregate Expenditures (AE) model is a key concept in macroeconomics that depicts the overall…
Q: $19 16 13 10 0 100 Multiple Choice O MC O O O 160 180 210 Quantity MR Refer to the diagram for a…
A: Monopolistically competitive firms operate independently selling similar products with unique…
Q: Brenda's body board factory rents equipment for shaping boards and hires students. Brenda pays $150…
A: Average fixed cost = Total fixed cost / Total productAverage variable cost = Total variable cost /…
Q: George and John, stranded together on an island, use clamshells for money. Last year George caught…
A: George caught 300 fish and 11 wild boards. John grew 200 bunches of bananas. Fish is sold for 2…
Q: Cañital stick for a country is $1600 billuon at the beginning of the year. Gross investment year is…
A: The objective of the question is to calculate the capital stock at the end of the year. The capital…
Q: Suppose the economy produces real GDP of $50 billion when unemple plot the economy's long-run…
A: The concept of the Long run aggregate supply curve can be explained as a graphical representation…
Q: 1. This question will let you examine/explore a more interesting utility func- tion than the simple…
A: The Marshallian demand curve, named after the economist Alfred Marshall, represents the relationship…
Q: Blank trade group The major economies in the ________ are China, South Korea, Japan, and Australia.
A: The allocation of resources to maximize the welfare of the economy is known as economics It also…
Q: = 2apples A. You have an apple orchard and have recently orand added a small plot of land for…
A: The production possibilities frontier (PPF) is a graphical representation that shows the maximum…
Q: Suppose that policy makers are concerned that the price of corn may get too low. The market for corn…
A: [Note: Since, MCQ b is not fully visible, we'll answer MCQ a only. To get the answer to MCQ b,…
Q: What is the production efficient q? C(q)= 100q-4q^2+0.2q^3+450
A: Efficient production refers to the optimal allocation and utilization of resources in the production…
Q: Store Local Shoe Store Different Neighborhood in Town Rural Outlet Travel Time Each Way (Minutes) 15…
A: Opportunity Cost:Opportunity cost refers to the value of the next best alternative that is forgone…
Q: Typed plz and asap wrong answer not accepted provide a quality solution if I get wrong answer I will…
A: The objective of this question is to find the profit-maximizing monopoly price and output given the…
Q: If American Art Supplies Company increases the production of crayons, it may need to reduce the…
A: The question is asking for the economic term that describes a situation where increasing the…
Q: Written Questions 1. Analyze the scenario for each market. The scenario will create a change in the…
A: Market equilibrium refers to a state in a market where the quantity demanded for a good or service…
Q: What is the term used to describe the transition of an economy from low - income to high - income…
A: The need for economic transition is triggered by economic challenges or opportunities. An economy…
Q: Suppose demand is given by the equation Q = 40 - 3P. Using the point-slope formula, what is the…
A: The objective of the question is to calculate the price elasticity of demand using the point-slope…
Q: Consider the following supply-and-demand diagrams depicting the markets for X and Y, respectively.…
A: At a marketplace, any change in demand or supply of a good will affect the market price as well as…
Q: Suppose country X currently produces $1000 of goods and services per year with a constant growth…
A: National production encompasses the overall value of goods and services generated within a nation's…
Q: aaaaaa A soft drink machine outputs a mean of 27 ounces per cup. The machine's output is normally…
A: The objective of the question is to find the probability of the soft drink machine filling a cup…
Q: Seven years ago a New Brunswick logging company purchased a used wood chipperfor $117,000 for…
A: The objective of the question is to calculate the annual worth of the wood chipper considering its…
Q: Number of Units 1 W|N 2 3 4 Total Utility 40 80 140 182 222
A: Utility refers to the happiness or satisfaction that an individual get from the consumption of a…
Q: This question is intended to have a written response given. The writtenresponse should be 2-3…
A: The objective of the question is to analyze the potential impact on the grocery market and welfare…
Q: Should an economically integrated region be considered as one market area? Explain your answer.…
A: Trade blocs play a vital role in nurturing economic collaboration and advancement among member…
Q: Assume an economy's aggregate production function has the following form Y = AK*L¹-* Where a = 0.25…
A: ***Since the student has asked for some specific subparts to be solved, the expert is required to…
Q: Y = AK1/3L2/3; Y = 30, K = 10, L = 20. The TPF is A. 1.89 B. 0.89 C. 1.27 D. 1.05
A: The production function is the mathematical relationship between the output and the technical…
Q: Don Harrison's current salary is $60,000 per year, and he is planning to retire 25 years from now.…
A: Discounted payback Period is used to evaluate the time it takes for an investment to generate enough…
Q: Price Quantity $25 0 $20 4 $15 8 $10 12 $5 16 $0 20 Refer to the Table. Using the midpoint method,…
A: The price and quantity is given as follows. Price Quantity$250$204$158$1012$516$020
Q: Consider the demand and supply for cigarettes in Cleveland. When the government imposes a $5 tax on…
A: The issue spins around understanding how the burden of a sales tax (SS tax) on cigarettes by the…
Q: Question (1): Location Choice of Transfer-Oriented Firms Suppose a transport cost-oriented firm…
A: Nash Equilibrium describes a situation in game theory in which each participant's strategy is…
Q: Public wifi hotspots grant many external benefits on society: more equitable access to the internet,…
A: An externality is a consequence of an economic activity that is experienced by unrelated third…
Q: invest
A: 1. Market Demand and Competition:Seasonality: Blackpool tourism heavily relies on summer months. Is…
Q: only tiped solution
A: The objective of the question is to find the cost-effective abatement levels for two firms given…
Q: Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care…
A: The role of emerging economies in the World Trade Organization (WTO) is significant. Emerging…
Q: Suppose that Shen, an economist from a research facility in Washington, and Valerie, another…
A: Economists refers to those professionals who study and dissect economic frameworks, ways of…
Q: Graph these cost behaviour patters over a relevant range of 0 - 10,000 units:a. Variable expenses of…
A: In sub-part a, the variable cost per unit is given as $8. For each additional unit produce costs…
Q: Calculate the inflation rate for Minnesota between 2021 and 2022.
A: The inflation rate is a measure of the rate of change in prices for a basket of goods and services…
Q: The short-run production function of a competitive firm is given by f (L) = 6L2/3, where L is the…
A: The production function depicts the technical relationship between the quantities of the factors of…
Q: The table below shows Tim's and Al's willingnesses-to-pay (marginal benefit) for each firefighter…
A: The objective of the question is to find the socially efficient number of firefighters. This is…
Solute question4 please
Step by step
Solved in 4 steps with 4 images
- An aggressive investment in Industry 4.0 next-generation technology has the potential to save your company $7M if it is very successful, or $3M if it is moderately successful, but it will cost $2M if it fails. The relative risk for the project is $1.25M. The company has a risk tolerance of $1 million and has assigned a utility value of .777 based on an exponential utility function for this investment. What is the value of a safe investment that the company would just as soon choose rather than investing in the IT project? A. $2M B. $1.5M C. 52.75 D. $1.25MElizabeth has decided to form a portfolio by putting 30% of her money into stock 1 and 70% into stock 2. She assumes that the expected returns will be 10% and 18%, respectively, and that the standard deviations will be 15% and 24%, respectively. Describe what happens to the standard deviation of the portfolio returns when the coefficient of correlation ρ decreases. The standard deviation of the portfolio returns decreases as the coefficient of correlation decreases. The standard deviation of the portfolio returns increases as the coefficient of correlation increases. The standard deviation of the portfolio returns decreases as the coefficient of correlation increases. The standard deviation of the portfolio returns increases as the coefficient of correlation decreases.Buying and selling prices for risky investments obviously are related to certain equivalents. This problem, however, shows that the prices depend on exactly what is owned in the first place. Suppose that your utility for wealth (A) can be represented by the utility function u(A) = In [(A)] You currently have R1000 in cash. A business deal of interest to you yields a reward of R100 with probability 0,5 and RO with probability 0,5. 2.1 If you own this business deal in addition to the R1000, what is the smallest amount for which you would sell the deal? 2.2 Suppose you do not own the deal. Formulate an appropriate equation and solve with algebra to find the largest amount you would be willing to pay for the deal. 2.3 Explain why the amounts in 2.1 and 2.2 are slightly different.
- You are an investment analyst for De Caul’s Investments Inc., an independent financial consulting firm. Your latest assignment is to provide an independent assessment of RBL. RBL is a Caribbean-based company that manufactures building products and provides services for the construction and engineering sectors. The company has several divisions which operate as separate entities. The case study analysis consists of a core section, The Markowitz Portfolio Theory and you will have to either conduct research or perform calculations. The assessment must be completed within five days because a meeting has been scheduled with the client to discuss your findings. Saving cash in the bank is not as attractive as it was in the past, and RBL is looking to invest some of its surplus cash. In a meeting with senior managers in the company, you mention the Modern Portfolio Theory which was pioneered by Markowitz. Required: Explain to the senior manager, The purpose of the Markowitz Portfolio…John Davidson is an investment adviser at Leeds Asset Management plc. He is asked by a client to evaluate various investment opportunities currently available and he has calculated expected returns and standard deviations for five different well-diversified portfolios of risky assets: Portfolio Expected return Standard deviation Q 7.8% 10.5% R 10.0% 14.0% S 4.6% 5.0% T 11.7% 18.5% U 6.2% 7.5% (a) For each portfolio, calculate the risk premium per unit of risk (Sharpe ratio) that you expect to receive. Assume that the risk-free rate is 3.0%. (b) If you are only willing to make an investment with a standard deviation of 7.0%, is it possible for you to earn a return of 7.0%? (c) What is the minimum level of risk that would be necessary for an investment to earn 7.0%? What is the composition of the portfolio along the Capital Market Line (CML) that will generate that expected return?8. Risk and return Suppose Frances is choosing how to allocate her portfolio between two asset classes: risk-free government bonds and a risky group of diversified stocks. The following table shows the risk and return associated with different combinations of stocks and bonds. Combination A B с D E Fraction of Portfolio in Diversified Stocks (Percent) 0 25 50 75 100 Average Annual Return (Percent) 2.00 4.50 7.00 9.50 12.00 As the risk of Frances's portfolio increases, the average annual return on her portfolio Standard Deviation of Portfolio Return (Risk) (Percent) 0 Accept more risk Sell some of her bonds and use the proceeds to purchase stocks Sell some of her stocks and place the proceeds in a savings account Sell some of her stocks and use the proceeds to purchase bonds 5 10 15 20 Suppose Frances currently allocates 25% of her portfolio to a diversified group of stocks and 75% of her portfolio to risk-free bonds; that is, she chooses combination B. She wants to increase the average…
- You plan to invest $1,000 in a corporate bond fund or in a common stock fund. The following table represents the annual return (per $1,000) of each of these investments under various economic conditions and the probability that each of those economic conditions will occur. Compute the expected return for the corporate bond and for the common stock fund. Show your calculations on excel for expected returns. Compute the standard deviation for the corporate bond fund and for the common stock fund. Would you invest in the corporate bond fund or the common stock fund? Explain. If choose to invest in the common stock fund and in (c), what do you think about the possibility of losing $999 of every $1,000 invested if there is depression. Explain.You observe the E[IBM] = 8%, E[AAPL] = 12%, B(AAPL)=B(IBM)+2/3, Risk-free rate is 4%. What is the expected return on the market portfolio assuming the CAPM is true.You are considering a $500,000 investment in the fast-food industry and have narrowed your choice to either a McDonald's or a Penn Station East Coast Subs franchise. McDonald's indicates that, based on the location where you are proposing to open a new restaurant, there is a 25 percent probability that aggregate 10-year profits (net of the initial investment) will be $16 million, a 50 percent probability that profits will be $8 million, and a 25 percent probability that profits will be -$1.6 million. The aggregate 10-year profit projections (net of the initial investment) for a Penn Station East Coast Subs franchise is $48 million with a 2.5 percent probability, $8 million with a 95 percent probability, and -$48 million with a 2.5 percent probability. Considering both the risk and expected profitability of these two investment opportunities, which is the better investment? Explain carefully.
- Two stocks are available. The corresponding expectedrates of return are r¯1 and r¯2; the corresponding variances and covariances areσ12, σ22, and σ12. What percentages of total investment should be invested ineach of the two stocks to minimize the total variance of the rate of return ofthe resulting portfolio? What is the mean rate of return of this portfolio?Phillip Witt, president of Witt Input Devices, wishes to create a portfolio of local suppliers for his new line of keyboards. Suppose that Phillip is willing to use one local supplier and up to two more located in other territories within the country. This would reduce the probability of a "super-event" that might shut down all suppliers at the same time at least 2 weeks to 0.6%, but due to increased distance the annual costs for managing each of the distant suppliers would be $24,500 (still $16,000 for the local supplier). A total shutdown would cost the company approximately $380,000. He estimates the "unique-event" risk for any of the suppliers to be 4%. Assuming that the local supplier would be the first one chosen, how many suppliers should Witt Input Devices use? Find the EMV for alternatives using 1, 2, or 3 suppliers. EMV(1) = $ 36210 (Enter your response rounded to the nearest whole number.)A Real estate investor has the opportunity to purchase a small apartment complex. The apartment complex costs $4 million and is expected to generate net revenue (that after all operating and finance costs) of $60,000 per month. Course, the revenue can vary because the occupancy rate is uncertain. Considering the uncertainty, the revenue could vary from a low -$10,000 To a high of $100,000 per month. Assume that the investors objective is to maximize the value of the investment in the 10 years. The city Council is currently considering an application to rezone a nearby empty parcel of land. The owner of that land wants to build a small electronics assembly plant. Was plant does not really conflict with the city’s overall land use plan, but it may have a substantial long-term negative effect on the value the nearby residential district in which the apartment complex is located. Because the city Council currently is divided on the issue and will not make a decision until next month, the…