TASK 1 What is an exchange-traded fund? Give two examples of specific ETFs. What are some advantages they have over ordinary open-end mutual funds? What are some disadvantages? TASK 2 Explain the concepts of unique risk and market risk, and how the total level of portfolio risk can change by adding additional securities. In your answer also discuss the advantages of investing on international markets.TASK 3 Compare and contrast the strategies of index matching (or indexing) and immunisation for managing a bond portfolio. Provide examples for who would use such strategies under what circumstances. TASK 4Which one of the following portfolios CANNOT LIE on the efficient frontier as described by Markowitz? Explain your answer.A – Expected return (10%), Standard deviation (12%)B – Expected return (5%), Standard deviation (7%)C – Expected return (15%), Standard deviation (20%)D – Expected return (12%), Standard deviation (25%)TASK 5 You purchased 100 shares of IBM common stock on margin at $70 per share. Assume the initial margin is 50% and the maintenance margin is 30%. Below what stock price level would you get a margin call? Assume the stock pays no dividend: ignore interest on margin. Make sure that you interpret your numerical answer (i.e. explain why would you get the call below this price). TASK 6 A mutual fund manager expects her portfolio to earn a rate of return of 10% this year, The beta of her portfolio is 0.9. If the rate of return available on risk-free assets is 4% and you expect the rate of return on the market portfolio to be 12%, should you invest in this mutual fund? Calculate the expected rate of returm for this portfolio by using CAPM. (After your calculation do not forget to actually answer the question and explain your answer)TASK 7 An investor divides her portfolio into thirds, with one part in Treasury bills, one part in a market index, and one part in a diversified portfolio with beta of 1.50. What is the beta of the investor’s overall portfolio? What does this portfolio beta tells you about the investor’s portfolio? TASK 8 If a portfolio had a return of 8%, the risk-free asset return was 3%, the standard deviation of the excess returns was 20%, what is the sharp ratio of the portfolio? How would you interpret the outcome of your calculation?
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