assets pricing

    0

    assets pricing

    Question 1

    a).Carefully explain the use of bootstrapping methodology for separating skill and luck when examining the performance of mutual funds. What are the advantages of your chosen methodology? Briefly summaries empirical findings on mutual fund performance for the US and the UK.
    b) Most investors pick funds which are ranked at the top in league tables, whereas they rarely withdraw money invested in funds which have not done well. What does this tell you about investors’ behavior? Explain how you can test for persistence in fund performance

    Question 2:
    a). Explain why bonds are not risk-free.
    b).What is the difference between a callable and convertible bond? Why would a firm want to issue these two types of bond?
    Explain the difference between the yield to maturity and the holding period return on a long term bond.
    c) Explain the portfolio selection concepts known as “safety first” and “stochastic dominance”.
    Qusetion3;
    a) Why should you be careful when using the internal rate of return (IRR) to appraise projects?
    b) What do we mean by ‘effective interest rate’? Use an example to demonstrate this?
    C)Explain the ideas behind the Capital Asset Pricing Model (CAPM).
    Explain how the CAPM can be used in project appraisal? Carefully outline the Fama-MacBeth methodology for testing the CAPM.

    Question4;
    a) Clearly show and explain how you could derive the Security Market Line (SML) from the Capital Market Line (CML). Explain the different measures of risk used in these two concepts.
    b) Show how the SML can be expressed as a one-period pricing model. Briefly interpret the equation you derive.
    c) Explain how we would test the CAPM using the Fama-MacBeth (1973) methodology.

    Question 5:
    a) Do you think there is an argument for a UK based investor to diversify internationally?
    b)Carefully explain how a risk averse investor should make their asset allocation decision based on the mean-variance optimisation concept. Discuss briefly why ‘in the real world’ an investor might not follow this suggestion.
    ORDER THIS ESSAY HERE NOW AND GET A DISCOUNT !!!

                                                                                                                                      Order Now