Problem Set 2 helpful hints

Problem Set 2 is now available from the course website at http://fin4335.garven.com/spring2018/ps2.pdf; its due date is Thursday, January 25.

Problem Set 2 consists of two problems.  The first problem requires calculating expected value, standard deviation, and correlation, and using this information as inputs into determining expected return and standard deviation for 2-asset portfolios.  We covered these concepts during last Thursday’s statistics tutorial; also see pp. 10-20 of the http://fin4335.garven.com/spring2018/lecture3.pdf lecture note.  The second problem involves using the standard normal probability distribution to calculate probabilities of earning various levels of return by investing in risky securities and portfolios.  We will devote next Tuesday’s class meeting to this and related topics.

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