Portofolio Theory

Solutions: Brealey, Myers & Allen, 10th edition

2.12)        a) $90.53                b) $29.46                c) $3.52        d) $240.18

2.13)        a) 10.50%                b) 0.819                c) 2.465        d) 0.741

2.14)        86.739.66;                 583,623.76

2.15)        23,696,15

2.16)        a) $760,662.53        b) $382,714.30        c) $38,980.30

2.18)        −$1.256 million

2.19)        a) $100,000                b) $102,137                c) $95,000        d) $107,354        e) $92,857

2.21)        $3,276

2.22)        KA: 8934.11 (assuming nominal rate: 10%); TM: 9 000; the choice is KA.

2.23)        NPV(r =5%) = 25.011;  NPV(r =10%) = 3554;  NPV(r =15%) = -14.991;  r≈11 →NPV = 0.

2.25)        a)  PV=1 250 000        b)  PV=2 500 000        c)  PV=981 815

        d) (H1: assuming annually compounded rate: 8%) Continuously compounded rate: 7.6961%;  

        PV=1 020 583.6.

        d) (H2: assuming continuously compounded rate: 8%)  PV=997 629.4.

2.27)        7.18%

2.28)        c (12.19%) is the best alternative, b (12.04%) is better than a (12.00%).

1 year:         $1,1200;         $1,1204;         $1,1219,

5 years:         $1,7623;         $1,7657;         $1,7771,

20 years :        $9,6463,         $9,7193,         $9,9742.

2.30)         $4,761,724;                 9.81%

2.31)         PV = Loan0 = $402,265;        Interest1=32,181;   Repayment1=37,819;   Loan1=364,446

2.32)        a) Ignoring inflation: CF= 233,659        

b) With 4% inflation: CF1 = 185,070.6; CF2 = 192,473.4

3.17)        yield = 3%: B0 =109,16; B1 =107,43; R0/1 = 3%;        

yield1 = 2%: B0 =109,16; B1 =111,42; R0/1 = 6,65%.

4.15)         P0=100. For example P10 = 162,89