If the correlation between gold and stocks is sufficiently low, gold will be held as a component in a portfolio, specifically, the optimal tangency portfolio. Efficient frontier Efficient frontier b. Given the data above, re-answer part (a) with the additional assumption that the correlation coefficient between gold and stocks equals 1.0. Draw a graph illustrating why one would or would not hold gold in one’s portfolio. Could this set of assumptions for expected returns, standard deviations, and correlation coefficients represent an equilibrium for the financial markets?
Are there asset classes that should be excluded or others that should be included? 9. Why might standard deviation NOT capture the risks of all asset classes? 10. Using the data from attachments 10-11 (provided below), compute the optimal portfolio allocations if the portfolio mean return objective is 6.4% with some constraints (all weights sum to 100%, weights on cash >= -50% and weights on all other asset classes >=0) and the investor wishes to minimize standard deviation.
There are two basic reasons. First, the choice of units when absolute changes are used will have an arbitrary effect on the interpretation of responsiveness. For example, if price is calculated in dollars, then a one-unit drop in price (from $5 to $4) might be associated with a 10-unit increase in quantity. If, however, the price was calculated in cents, then a 100-unit drop in price would be associated with a 10-unit increase in quantity. In the first case, it would appear the demand is inelastic and in the second case it would appear to be elastic.
Practice Test 4 –Bus 2023 Directions: For each question find the answer that is the best solution provided. There is only one correct answer. 1. For a sample size of 30, changing from using the standard normal distribution to using the t distribution in a hypothesis test, a. will result in the rejection region being smaller b. will result in the rejection region being larger c. would have no effect on the rejection region d. Not enough information is given to answer this question. ANSWER: a -recall that all the t-values are larger than the z-values so it makes it more difficult to reject the null.
One carat is equivalent to 0.2 grams. All other things being equal, larger diamond stones command higher prices in view of their rarity. QUALITY Being products of Nature, diamonds have “birthmarks” or “inclusions” only visible under a jeweller's magnifying glass or a microscope. Diamonds with no inclusion under a loupe with a 10 power magnification are labelled IF (“internally flawless”). Lesser diamonds are categorized in descending order as “very very slightly imperfect” VVS1 or VVS2 and “very slightly imperfect” VS1 or VS2.
If the price of glass dramatically increases, what are we likely to see a lot less of: Glass windows or glass bottles? Why? GHOST ANSWER: We'll probably see a big decline in glass bottles, but only a small decline in glass windows. Plastic is a good substitute for glass in the manufacturing of bottles, but not as good a substitute for windows. Thus, we would probably see a greater percentage decline in glass bottles than in windows.
You win a dollar if the proportion of red marbles is larger than that of blue marbles, that is, if you get a proportion > 0.5 of reds. We know by the law of averages that chance error relative to the number of draws = (proportion of reds you get)- (proportion of reds expected) gets smaller and smaller as n increases. So use that to decide between the choices. So n=200 will get you closer to the true proportion of reds ( > 1/2) than n=100, and therefore n=200 will get you closer to winning the $1. p.286.
1). The DeBeers company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will: • Exceed the marginal cost of diamonds but equal to the average total cost of diamonds. • Exceed both the marginal cost and the average total cost of diamonds. • Be equal to the marginal cost of diamonds.
It also has a negative a value so the parabola will open downward. This means there will be a maximum value of the graph at the vertex, which will happen at the x value of –b/(2a), where b = 300 and a = -25 in this case. What number of clerks will maximize the profit? -b/(2a) -300/2(-25) Notice the b value is now negative because of the negative in the formula. -300/-50 6 clerks working will maximize profit.
The inelasticity of drugs creates a steep negative slope. This means that the price can experience great changes and the quantity demanded will change at a much smaller rate. This is further seen in the article in reference to Portugal’s decriminalization of drugs dating back to 2001. A study by the British Journal of Criminology found that the increase in users has increased only marginally if at all. The deregulation of government involvement has decreased the price of drugs but the demand has not greatly increased in response.