A large American oil company has just reported a major oil spill. How would one go about systematically analysing the impact of the public release of this information on the oil company's market value?
A.
(1) A large American oil company has just reported a major oil spill. How would one go about systematically analysing the impact of the public release of this information on the oil company's market value?
(2) If you wanted to analyse the impact of such events on the value of oil companies globally, what things would you do differently from question (1) above.
B.
Dr. Gambles has a utility function given as U(w)=In(w). Due to the pandemic affecting his consulting business, Dr Gambles faces the prospect of having his wealth reduced to £2 or £75,000 or £100,000 with probabilities of 0.15, 0.25, and 0.60, respectively. Suppose insurance is available that will protect his wealth from this risk. How much would he be willing to pay for such insurance?
C.
Explain the concept of iso-expected return lines, iso-variance ellipses, and the critical line and describe how these are useful in identifying the minimum variance frontier and the efficient frontier.
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