Consider a Kyle (1985) model where the true value of the stock is $30, the unconditional variance of the true value is 25, the variance of uninformed trading is 3600 and the unconditional expected value of the stock is $25, i.e., E[ü] = 25, 0(2)/(3) = 25 = 30,0, = 3600. 1)The informed trader's optimal demand (based on the model) is: A. 60 B. 55 C. 65 D. 70 2) The informed trader's ex- ante profit is: A . 180 B. 200 C. 150 D. 120 3) If noise trading u = -20. then price p is: A. 25.50 B. 26.68 C. 30.50 D. 28.50 4)Market maker's realized profit is_ and informed trader's realized profit is .-132.80; 199.20 B. -132.80; 132.80 C. 199.20; 199.20 D. 152.50; 165.50 A

Consider a Kyle (1985) model where the true value of the stock is $30, the unconditional variance of the true value is 25, the variance of uninformed trading is 3600 and the unconditional expected value of the stock is $25, i.e., E[ü] = 25, 0(2)/(3) = 25 = 30,0, = 3600. 1)The informed trader's optimal demand (based on the model) is: A. 60 B. 55 C. 65 D. 70 2) The informed trader's ex- ante profit is: A . 180 B. 200 C. 150 D. 120 3) If noise trading u = -20. then price p is: A. 25.50 B. 26.68 C. 30.50 D. 28.50 4)Market maker's realized profit is_ and informed trader's realized profit is .-132.80; 199.20 B. -132.80; 132.80 C. 199.20; 199.20 D. 152.50; 165.50 A

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter3: Risk And Return: Part Ii

Section: Chapter Questions

Problem 2P: APT An analyst has modeled the stock of Crisp Trucking using a two-factor APT model. The risk-free...

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Consider a Kyle (1985) model where the true value of the stock is $30, the unconditional variance of the true value is 25, the variance of uninformed trading is 3600 and the unconditional expected value of the stock is $25, i.e., E [ü] = 25, 0(2)/(3) = 25 = 30, 0, 3600. 1)The informed trader's optimal demand (based on the model) is: A. 60 B. 55 C. 65 D. 70 2)The informed trader's ex-ante profit is: A 180 B. 200 C. 150 D. 120 3) If noise trading u = -20. then price p is: A. 25.50 B. 26.68 C. 30.50 D. 28.50 4)Market maker's realized profit is and informed trader's realized profit is A. 132.80; 199.20 B. 132.80; 132.80 C. 199.20; 199.20 D. 152.50; 165.50
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