6) Data set 1 year returns on investment x returns on investment y 2000 5% 2% 20
ID: 2648637 • Letter: 6
Question
6) Data set 1
year
returns on investment x
returns on investment y
2000
5%
2%
2001
6%
2%
2002
4%
2%
2003
6%
2%
2004
5%
2%
2005
4%
2%
2006
4%
2%
2007
5%
2%
2008
6%
2%
2009
6%
2%
2010
4%
2%
2011
5%
2%
2012
2%
2%
2013
1%
2%
Base your answers on Data Set 1. Use the Average, STDEV.s and CORR functions to answer the questions about data set 1. Assume the past is the best forecast of the future.
Numbers should be carried to 2 decimals in Excel .
The risk of returns on investment Y is 0%.
True
False
E unsystematic
Question 14
"The business and affairs of ExxonMobil are managed by or under the direction of its Board in accordance with New Jersey law. The directors' fiduciary duty is to exercise their business judgment in the best interests of ExxonMobil's shareholders".
This quote from the Corporate Governance Guidelines of Exxon Mobil is totally inconsistent with protection of the environment. In fact it will increase the likelihood that the Board takes excessive risks.
True
False
Question 16
Management of GrubHub have listed the following factors that may cause the price and/or the liquidity of GrubHub
year
returns on investment x
returns on investment y
2000
5%
2%
2001
6%
2%
2002
4%
2%
2003
6%
2%
2004
5%
2%
2005
4%
2%
2006
4%
2%
2007
5%
2%
2008
6%
2%
2009
6%
2%
2010
4%
2%
2011
5%
2%
2012
2%
2%
2013
1%
2%
Explanation / Answer
6 Investment Y Year Returns(Y) Y-Mean Square of Y-Mean 2000 2 0 0 2001 2 0 0 2002 2 0 0 2003 2 0 0 2004 2 0 0 2005 2 0 0 2006 2 0 0 2007 2 0 0 2008 2 0 0 2009 2 0 0 2010 2 0 0 2011 2 0 0 2012 2 0 0 2013 2 0 0 Total 28 0 Mean= 28/14= 2% Standard deviation= 0% Hence, yes the standard deviation on the returns of Y is Zero 14 FALSE 16 FALSE 17 Investment X Year Returns(X) X-Mean Square of X-Mean 2000 5 0.5 0.25 2001 6 1.5 2.25 2002 4 -0.5 0.25 2003 6 1.5 2.25 2004 5 0.5 0.25 2005 4 -0.5 0.25 2006 4 -0.5 0.25 2007 5 0.5 0.25 2008 6 1.5 2.25 2009 6 1.5 2.25 2010 4 -0.5 0.25 2011 5 0.5 0.25 2012 2 -2.5 6.25 2013 1 -3.5 12.25 Total 63 29.5 Mean= 63/14= 4.5% Standard deviation= Square root of (29.5/14-1)= 1.51% Hence, False 21 If 75% is invested in X and 25% in Y: Year Returns(X) Returns(Y) Expected return from the portfolio X-Mean of X Y-Mean of Y X-Mean of X*Y-Mean of Y 2000 5 2 4.25 0.5 0 0 2001 6 2 5.00 1.5 0 0 2002 4 2 3.50 -0.5 0 0 2003 6 2 5.00 1.5 0 0 2004 5 2 4.25 0.5 0 0 2005 4 2 3.50 -0.5 0 0 2006 4 2 3.50 -0.5 0 0 2007 5 2 4.25 0.5 0 0 2008 6 2 5.00 1.5 0 0 2009 6 2 5.00 1.5 0 0 2010 4 2 3.50 -0.5 0 0 2011 5 2 4.25 0.5 0 0 2012 2 2 2.00 -2.5 0 0 2013 1 2 1.25 -3.5 0 0 Total 54.25 Covariance= 0 Mean= 54.25/14= 3.875% Risk of the Portfolio= Square root of {[Wx*Wx*Sd of X*Sd of X] + [Wy*Wy*Sd of Y*Sd of Y]+ [2*Wx*Wy*Cov(X,Y)]} Hence, Risk= Square root of {[Wx*Wx*Sd of X*Sd of X] + [Wy*Wy*Sd of Y*Sd of Y] Thus, risk= 1.70% Hence, True
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