The _________ is the rate of return a firm must earn on its investments in projects in order to
1 answer:
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Answer:
Portfolio Beta = 1.2815
Explanation:
given data
market value = $3,000,000
portfolio beta = 1.6
sells = 25
times index = $10
currently trading = 15379
to find out
anticipates that this hedge will reduce the portfolio beta to
solution
we get number of contract to sell is here
number of contract to sell = Portfolio Beta × ......................1
put here value we get
25 = Portfolio Beta ×
solve it we get
Portfolio Beta = 1.2815
Answer:
The number of CDs = 111.36
The number of movie videos = 242.72
N/B: I choose not to round up the answers.
Explanation:
The method used is the Lagrangian method. Basically, the optimization problem we are trying to solve is the utility function
subject to the constraint
.
So the optimization problem(Lagrangian) is
,
where is a constant called the Lagrange multiplier.
To find the optimal consumption, we need to maximize the Lagrangian with respect to the variables . This we do by differentiating
with respect to each variable and then equate to 0.
Equate (1) and (2), to get and substitute into (3) to get
. Substituting
into
to get the corresponding value of
.