… are available at http://fin4335.garven.com/spring2018/ps2solutions.pdf…
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.
Problem Set 1 is due at the beginning of class on Tuesday, January 16. Here is a hint for solving the 4th question on problem set 1.
The objective is to determine how big a hospital must be so that the cost per patient-day is minimized. We are not interested in minimizing total cost; if this were the case, there would be no hospital because marginal costs are positive, which implies that total cost is positively related to the number of patient-days.
The cost equation C = 4,700,000 + 0.00013X2 tells you the total cost as a function of the number of patient-days. This is why you are asked in part “a” of the 4th question to derive a formula for the relationship between cost per patient-day and the number of patient days. Once you have that equation, then that is what you minimize, and you’ll be able to answer the question concerning optimal hospital size.
At any given point in time during the upcoming semester, you can ensure that you are on track with Finance 4335 assignments by monitoring due dates which are published on the course website. See http://fin4335.garven.com/readings/ for due dates pertaining to reading assignments, and http://fin4335.garven.com/problem-sets/ for due dates pertaining to problem sets. Also keep in mind that short quizzes will be administered in class on each of the dates indicated for required readings. As a case in point, since the required readings entitled “Optimization” and ” How long does it take to double (triple/quadruple/n-tuple) your money?” are listed for Thursday, January 11, this means that a quiz based upon these readings will be given in class on that day.
Important assignments due on the second class meeting of Finance 4335 (scheduled for Thursday, January 11) include: 1) filling out and emailing the student information form as a file attachment to email@example.com, 2) subscribing to the Wall Street Journal, and 3) subscribing to the course blog. A completed Student information form is graded as a problem set and receives 100 points; if you don’t turn in a Student information form, then you will receive a 0 for this “problem set”. Furthermore, tasks 2 and 3 listed above count toward your class participation grade in Finance 4335.
A course blog has been established for Finance 4335 at the address http://risk.garven.com; it is also linked from the “Course Blog” button located on the course website. I recommend that you follow the risk management course blog regularly via email, RSS, Facebook, and/or Twitter.
The risk management course blog provides me with a convenient means for distributing important announcements to the class. Topics covered on the course blog typically include things like changes in the course schedule, clarifications and hints concerning problem sets, information about upcoming exams, announcements concerning extra credit opportunities, and short blurbs showing how current events relate to many of the topics which we cover in Finance 4335.
If you already are familiar with RSS, this is a great way to subscribe to the options, futures, and other derivatives course blog. By going to the http://risk.garven.com/feed webpage, you can subscribe by using Firefox’s Live Bookmarks feature, Internet Explorer’s RSS feed subscription feature, or an RSS reader. If you are either a Facebook or Twitter user, everything that is posted on the options, futures, and other derivatives course blog is automatically posted to Facebook and “tweeted”, so you can also subscribe by “liking” the Finance 4335 Facebook page or by “following” @fin4335 on Twitter. Finally, you can also subscribe via email. The remainder of this blog entry explains how to subscribe to the options, futures, and other derivatives course blog via email.
Email Subscription Instructions:
Email Subscription Instructions: If you would like to receive the risk management course blog via email, you can do this by going to http://risk.garven.com and entering your email address in the form provided on the left hand side of that webpage:
From that point forward, whenever I post to the course blog, you will immediately receive a nicely formatted version of the blog posting via email. Also, you can opt to change your delivery preferences, or even cancel your subscription.
A subscription to the Wall Street Journal is required for Finance 4335. In order to subscribe to the Wall Street Journal (WSJ) for the Spring 2018 semester, go to http://r.wsj.net/j73NM. Your WSJ subscription includes access to print, online, tablet and mobile editions, and only costs $1 for a 15 week subscription. At your option, you may choose to receive both the digital and paper versions of WSJ or only the WSJ digital version.
Throughout the semester, I will often reference specific WSJ articles in class and on the course blog. Finance 4335 topics (as well as topics in many of your other business school courses) come to life in the world outside the Baylor bubble when you read make a habit of reading the WSJ on a regular basis. Furthermore, if you expect to interview for jobs or internships anytime soon, reading the WSJ will give you a leg up on the competition, since you will be better informed and have more compelling ideas and insights to share with recruiters.
In closing, the following (2 minute) video provides a helpful introduction to the WSJ, providing time-saving tips to help you get the most from WSJ and succeed not only in Finance 4335, but also your other courses and careers: