Consider the Following Data for Assets a and B $\bar { R } _ { \mathrm { A } } = 10 \%$

question 34

Essay

Consider the following data for assets A and B: $\bar { R } _ { \mathrm { A } } = 10 \%$ ; $\bar { R } _ { B } = 19 \%$ ; $\sigma _ { \mathrm { A } } = 3 \%$ ; $\sigma _ { B } = 5 \%$ ; $\beta _ { \mathrm { A } } = 0.6$ ; $\beta _ { B } = 1.4$ ; $\rho _ { A B } = 0.4$ .
a. Calculate the expected return, variance, and beta of a portfolio constructed by investing 1/3 of your funds in asset A and 2/3 in asset B.
b. If only the riskless asset and assets A and B are available, find the optimum risky-asset portfolio if the risk-free rate is 8%.

Understand the concept and application of Two-Factor Analysis of Variance (ANOVA).

Identify and interpret interaction between factors in a factorial experiment.

Describe and perform steps necessary for conducting a factorial experiment.

Analyze and create an ANOVA table from experimental data.

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Definitions:

FDIC

The Federal Deposit Insurance Corporation, a U.S. government agency that insures deposits at banks and thrift institutions to maintain public confidence and financial stability.

Savings and Loan Debacle

A financial crisis in the United States during the 1980s and 1990s involving the failure of savings and loan associations, largely due to risky business practices.

Checkable Deposits

Consist of money in bank accounts that can be drawn upon by writing a check or using a debit card, offering immediate liquidity.

Savings and Loans

Financial institutions that specialize in accepting savings deposits and making mortgage and other loans.