An investor can invest in 2 assets: a government T-bill with a certain return of 0.03, and the index of all stocks in the S&P 500 (an asset called SPY). The SPY asset has the following properties: E(r) = 0.08; volatility = 0.2 What is the Sharpe ratio of the SPY asset? 1.33 Let’s say the investor sets up their portfolio such that 40% is invested in SPY, and 60% is invested in the risk-free government debt. What is the expected return of the portfolio? 5 % (answer in units of %) What is the volatility of a portfolio? 8 % (answer in units of %) What is the Sharpe ratio of the portfolio? 25 Let’s say the investor had a utility function described by U = E(r) - 1/2*A*V^2, where A is the investor’s risk-aversion coefficient, and V is the volatility of the investor’s portfolio returns. If A = 3, would the investor prefer a) the initial setup with 40% invested in SPY, or b) 60% invested in SPY, and 40% invested in the risk-free asset instead? (please write one of the following: a b ) b

Anewspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. daily paper sales are normally distributed, with a mean of 100 and standard deviation of 10. he sells papers for $0.50 and pays $0.30 for them. unsold papers are trashed with no salvage value. how many papers should he order each day and what % of the time will he experience a stockout? are there any drawbacks to the order size proposed and how could the boy address such issues?

James albemarle created a trust fund at the beginning of 2016. the income from this fund will go to his son edward. when edward reaches the age of 25, the principal of the fund will be conveyed to united charities of cleveland. mr. albemarle specified that 75 percent of trustee fees are to be paid from principal. terry jones, cpa, is the trustee. james albemarle transferred cash of $500,000, stocks worth $400,000, and rental property valued at $250,000 to the trustee of this fund. immediately invested cash of $360,000 in bonds issued by the u.s. government. commissions of $7,900 are paid on this transaction. incurred permanent repairs of $9,000 so that the property can be rented. payment is made immediately. received dividends of $8,000. of this amount, $3,000 had been declared prior to the creation of the trust fund. paid insurance expense of $4,000 on the rental property. received rental income of $10,000. paid $8,000 from the trust for trustee services rendered. conveyed cash of $7,000 to edward albemarle.

The brs corporation makes collections on sales according to the following schedule: 30% in month of sale 66% in month following sale 4% in second month following sale the following sales have been budgeted: sales april $ 130,000 may $ 150,000 june $ 140,000 budgeted cash collections in june would be: