QM323 Problem set 3 PDF

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problem set 3 out of 4...

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Quest i on1:Por t f ol i oAnal ysi s Youhav ebeenas k edt oc ons t r uc tapor t f ol i ot hati nv es t si nt hr ees t oc k s :Amer i c anAi r l i nes , Mer c k ,andChevr on.Yourc l i entwant st ok nowwhats har eofherpor t f ol i ot oi nv es ti neac hof t hesec ompani es ,andshewant st her i skoft hepor t f ol i o( t hepor t f ol i ov ar i anc e)t obeass mal l aspos si bl e.Shewant st oear nar et ur nofatl eas t3%.Mont hl ys t oc kpr i c edat af ort hes et hr ee c ompani esar epos t edonQues t r omTool s . 1.Comput et hemont hl yr et ur nf oreac hst oc k 2.Whatar et hemeansandst andar ddev i at i onsofr et ur nsf oreac hs t oc kov ert hi sper i od?

3. Usi ngt hev ar i anc ec ov ar i anc emat r i xgi v en,c ons t r uc tamodel t omi ni mi z ev ar i anc e s ubj ectt oac ons t r ai ntt hatt hepor t f ol i or et ur nmus tbeatl eas t3%.Whatar et hes har es al l oc at edt oeac hs t oc k ?

4.Per f or ms ens i t i v i t yanal y s i s .Howdot hei nv es t mentshar esandt hepor t f ol i ov ar i anc e c hangeaswei nc r eas et her equi r edr et ur nf r om 1%,t o2%,3%,and4%?Dot he f r ac t i onsi nv es t edchangei nt hewayy ouwoul dex pec t ?Whyorwhynot ?Whathappens whenwer equi r ear et ur nof5%?

5.Thec l i ents t i l lr equi r esar et ur nof3%,buthasdec i dedt ol i mi ti nv es t menti noi l c ompani esl i k eChev r ont onomor et han10% oft hepor t f ol i o.Howdoest hi saffectt he r i s koft hepor t f ol i o? Ther ewi l lbemor er i s ksast hepor t f ol i owei ght smor eont heot her2s t oc ks ,whi chcan mak et hepor t f ol i oear nsmor eorl os emor e. Quest i on2:Sensi t i vi t y 1.Us et heDet ai l erwor k bookdev el opedi ncl as s( andpos t edonQuest r omT ool si nCl as s13 f ol der )t odos ens i t i v i t yanal y s i soft hei mpac tofmanuf ac t ur er ’ spr i ceonpr ofi t . 2.Cal c ul at et hec hangei nmanuf ac t ur er ’ spr i c er equi r edt odr i v et hegr os spr ofi tt oz er o,t he dol l ari mpac tongr os spr ofi tofa1per c ent agepoi nti nc r easei npr i c e,andt heel as t i c i t yofpr ofi t wi t hr es pec tt opr i c e.

3.Howdoest hesens i t i v i t yofgr os spr ofi twi t hr es pec tt opr i cecompar et ot hes ens i t i v i t yofpr ofi t wi t hr es pec tt oot herv ar i abl es( e. g.di r ec tmat er i al scos t ,awar enes s ,et c . ) ? Thes ens i t i v i t yofgr os spr ofi twi t hr es pec tt opr i cehasmor ev ar i abi l i t yt hanot herv ar i abl es , bas edont heel as t i c i t yc hangedduet o1% i nc r eased Quest i on3:Si mul at i on Ret ur nt ot hemos tbas i cWal t onBook sex ampl ecov er edi nc l as s( seeAl br i ghtandWi ns t on, ex ampl e15. 3) .Nowsuppos et hatWal t onr ecei v esnomoneyf ort hefi r s t50ex c es scal endar s r et ur nedbutr ec ei v es2. 50f orev er yc al endaraf t ert hefi r s t50r et ur ned.Cons i dert hef ol l owi ng or derquant i t i es :160,165,170,175,and180. 1.Whati st heav er agepr ofi tundereac hor derquant i t y ,andwhati st heopt i mal or derquant i t y ?

Order quantity=160, % of profit=72% Order quantity=165, % of profit=81% Order quantity=170, % of profit=73% Order quantity=175, % of profit=66% Order quantity=180, % of profit=74% The optimal order quantity=165...