Modern Portfolio Theory and Investment Analysis， 6th Solutions.pdf

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1、Elton,Gruber,BrownandGoetzmannModernPortfolioTheoryandInvestmentAnalysis,6thEditionSolutionstoTextProblems:Chapter1Chapter1:Problem1A.OpportunitySetWithonedollar,youcanbuy500redhotsandnorockcandies(pointA),or100rockcandiesandnoredhots(pointB),oranycombinationofredho

2、tsandrockcandies(anypointalongtheopportunitysetlineAB).Algebraically,ifX=quantityofredhotsandY=quantityofrockcandies,then:0.2X1Y100Thatis,themoneyspentoncandies,whereredhotssellfor0.2centsapieceandrockcandysellsfor1centapiece,cannotexceed100cents($1.00).Solvingthe

3、aboveequationforXgives:X5005Ywhichistheequationofastraightline,withaninterceptof500andaslopeof5.Elton,Gruber,BrownandGoetzmann1ModernPortfolioTheoryandInvestmentAnalysis,6thEditionSolutionstoTextProblems:Chapter1B.IndifferenceMapBelowisoneindifferencemap.Theindif

4、ferencecurvesupandtotherightindicategreaterhappiness,sincethesecurvesindicatemoreconsumptionfrombothcandies.Eachcurveisnegativelysloped,indicatingapreferenceofmoretoless,andeachcurveisconvex,indicatingthattherateofexchangeofredhotsforrockcandiesdecreasesasmoreandmor

5、erockcandiesareconsumed.Notethattheexactslopesoftheindifferencecurvesintheindifferencemapwilldependantheindividual’sutilityfunctionandmaydifferamongstudents.Chapter1:Problem2A.OpportunitySetTheindividualcanconsumeeverythingattime2andnothingattime1,which,assumingaris

6、klesslendingrateof10%,givesthemaximumtime-2consumptionamount:$20+$20(1+0.1)=$42.Instead,theindividualcanconsumeeverythingattime1andnothingattime2,which,assumingarisklessborrowingrateof10%,givesthemaximumtime-1consumptionamount:$20+$20(1+0.1)=$38.18Elton,Gruber,Bro

7、wnandGoetzmann2ModernPortfolioTheoryandInvestmentAnalysis,6thEditionSolutionstoTextProblems:Chapter1TheindividualcanalsochooseanyconsumptionpatternalongthelineAB(theopportunityset)below.Theopportunitysetlinecanbedeterminedasfollows.Consumptionattime2isequaltotheamou

8、ntofmoneyavailableintime2,whichistheincomeearnedattime2,$20,plustheamountearnedattime2fromanymoneyinvestedattime1,($20C1)(1+0.1):C2=$20+