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WUSTL FIN 441 - Textbook Assignment 3

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Department of Finance Olin Business School Washington University in St. Louis Spring 2022 FIN 441-Investments Textbook Assignment 3 Due Feb 9th, 2022 1. (Bodie, Kane & Marcus 2021, Chapter 4, Problem 2) What are some comparative advantages of investing in the following? a. Unit investment trusts. b. Open-end mutual funds. c. Individual stocks and bonds that you choose for yourself. 2. (Bodie, Kane & Marcus 2021, Chapter 4, Problem 9) The composition of the Fingroup Fund portfolio is as follows: Stock Shares Price A 200,000 $35 B 300,000 40 C 400,000 20 D 600,000 25 The fund has not borrowed any funds, but its accrued management fee with the portfolio manager currently totals $30,000. There are 4 million shares outstanding. What is the net asset value of the fund? 3. (Bodie, Kane & Marcus 2021, Chapter 4, Problem 9) Reconsider the Fingroup Fund in the previous problem. If during the year the portfolio manager sells all of the holdings of stock D and replaces it with 200,000 shares of stock E at $50 per share and 200,000 shares of stock F at $25 per share, what is the portfolio turnover rate?4. (Bodie, Kane & Marcus 2021, Chapter 5, Problem 3) The Narnian stock market had a rate of return of 45% last year, but the inflation rate was 30%. What was the real rate of return to Narnian investors? 5. (Bodie, Kane & Marcus 2021, Chapter 5, Problem 12) Visit Professor Kenneth French’s data library Web site: Kenneth French’s data and download the monthly returns of “6 portfolios formed on size and book-to-market (2 ×3).” Choose the value-weighted series for the period from January 1930–December 2018. Split the sample in half and compute the average, SD, sharpe ration, skew, and kurtosis for each of the six portfolios for the two halves. Do the six split-halves statistics suggest to you that returns come from the same distribution over the entire

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