Indicate whether the following statements are true or false (circle one). Use 1 or 2 sentences to discuss why it is so. (a) If R is simple 1-month return, then the annualized return is 12 x R, after assuming all R = R. True False Why? (b) Let 1 AIG₂ be continuously compounded 1-month returns for Goldman Sachs Group (GS) and American International Group (AIG). If we construct a portfolio using the share ain[0, 1] for GS, the portfolio cc return is = OC*T +(1-x)*r - True False Why? (c) In 5. (b)., if 5% quantile of the portfolio cc return is given as AIG, r GS, and r. r P.4 GS, r 90.05 = -0.5, then 5% monthly Value-at-Risk for the $10,000 investment in this portfolio is $10,000 × (-0.5) = -$ 5,000. True False

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Indicate whether the following statements are true or false (circle one). Use 1 or 2 sentences to discuss why it is so. (a)
If R, is simple 1-month return, then the annualized return is 12 x R, after assuming all R = R. True False Why? (b) Let
and r
GSA
be continuously compounded 1 - month returns for Goldman Sachs Group (GS) and American
International Group (AIG). If we construct a portfolio using the share ain[0, 1] for GS, the portfolio cc return is
ľ
AIG
= 0x*y +(1-x)*r True False Why? (c) In 5. (b)., if 5% quantile of the portfolio cc return is given as
AIG,
GS,
r
40.05
= -0.5, then 5% monthly Value-at-Risk for the $10,000 investment in this portfolio is $10,000 × (-0.5) = -$
5,000. True False
r
Transcribed Image Text:Indicate whether the following statements are true or false (circle one). Use 1 or 2 sentences to discuss why it is so. (a) If R, is simple 1-month return, then the annualized return is 12 x R, after assuming all R = R. True False Why? (b) Let and r GSA be continuously compounded 1 - month returns for Goldman Sachs Group (GS) and American International Group (AIG). If we construct a portfolio using the share ain[0, 1] for GS, the portfolio cc return is ľ AIG = 0x*y +(1-x)*r True False Why? (c) In 5. (b)., if 5% quantile of the portfolio cc return is given as AIG, GS, r 40.05 = -0.5, then 5% monthly Value-at-Risk for the $10,000 investment in this portfolio is $10,000 × (-0.5) = -$ 5,000. True False r
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