TUGAS ANALISA INVESTASI DAN MANAJEMEN RESIKO

SOAL
1.

Financial engineering has been disparaged as nothing more than paper shuffling. Critics argue
that resources used for rearranging wealth (that is, bundling and unbundling financial assets)
might be better spent on creating wealth (that is, creating real assets). Evaluate this criticism.
Are any benefits realized by creating an array of derivative securities from various primary
securities?

2.

Why are money market securities sometimes referred to as cash equivalents?

3.

How do margin trades magnify both the upside potential and the downside risk of an
investment position?

4.

Balanced funds, life-cycle funds, and asset allocation funds all invest in both the stock and
bond markets. What are the differences among these types of funds?

5.

Use Figure 5.1 in the text to analyze the effect of the following on the level of real interest
rates:
a. Businesses become more pessimistic about future demand for their products and
decide to reduce their capital spending.
b. Households are induced to save more because of increased uncertainty about their
future Social Security benefits.
c. The Federal Reserve Board undertakes open-market purchases of U.S. Treasury
securities in order to increase the supply of money.

6.

Draw the indifference curve in the expected returnstandard deviation plane corresponding to
a utility level of .05 for an investor with a risk aversion coefficient of 3. ( Hint: Choose several
possible standard deviations, ranging from 0 to .25, and find the expected rates of return
providing a utility level of .05. Then plot the expected returnstandard deviation points so
derived.)

7.

Solve numerically for the proportions of each asset and for the expected return and standard
deviation of the optimal risky portfolio.

8.

Consider the two (excess return) index model regression results for A and B:
R A 5 1% 1 1.2 R M
R -square 5 .576
Residual standard deviation 5 10.3%
R B 5 2 2% 1 .8 R M
R -square 5 .436
Residual standard deviation 5 9.1%sit us at www.mhhe.com/bkm
a. Which stock has more firm-specific risk?
b. Which has greater market risk?
c. For which stock does market movement explain a greater fraction of return variability?
d. If r f were constant at 6% and the regression had been run using total rather than
excess returns, what would have been the regression intercept for stock A ?

9.

Consider the following table, which gives a security analysts expected return on two stocks for
two particular market returns:
Market Return
5%
25

a.
b.
c.
d.

Aggressive Stock
-2%
38

Defensive Stock
6%
12

What are the betas of the two stocks?

What is the expected rate of return on each stock if the market return is equally likely
to be 5% or 25%?
If the T-bill rate is 6% and the market return is equally likely to be 5% or 25%, draw the
SML for this economy.
Plot the two securities on the SML graph. What are the alphas of each?

e.

What hurdle rate should be used by the management of the aggressive firm for a
project with the risk characteristics of the defensive firms stock?

TUGAS ANALISA INVESTASI DAN MANAJEMEN RESIKO

JAWABAN
1. Ultimately, it is true that real assets determine the material well being of an economy.
Nevertheless, individuals can benefit when financial engineering creates new products that
allow them to manage their portfolios of financial assets more efficiently. Because bundling
and unbundling creates financial products with new properties and sensitivities to various
sources of risk, it allows investors to hedge particular sources of risk more efficiently.
2. Money market securities are called cash equivalents because of their great liquidity. The
prices of money market securities are very stable, and they can be converted to cash (i.e.,
sold) on very short notice and with very low transaction costs.
3. The dealer sets the bid and asked price. Spreads should be higher on inactively traded stocks
and lower on actively traded stocks
4. Balanced funds keep relatively stable proportions of funds invested in each asset class. They
are meant as convenient instruments to provide participation in a range of asset classes. Lifecycle funds are balanced funds whose asset mix generally depends on the age of the investor.
Aggressive life-cycle funds, with larger investments in equities, are marketed to younger
investors, while conservative life-cycle funds, with larger investments in fixed-income
securities, are designed for older investors. Asset allocation funds, in contrast, may vary the
proportions invested in each asset class by large amounts as predictions of relative
performance across classes vary. Asset allocation funds therefore engage in more aggressive
market timing.
5. A. If businesses reduce their capital spending, then they are likely to decrease their demand for
funds. This will shift the demand curve in Figure 5.1 to the left and reduce the equilibrium real
rate of interest.
B. Increased household saving will shift the supply of funds curve to the right and cause real
interest rates to fall.
C. Open market purchases of U.S. Treasury securities by the Federal Reserve Board is
equivalent to an increase in the supply of funds (a shift of the supply curve to the right). The
equilibrium real rate of interest will fall.
6. Points on the curve are derived by solving for E(r) in the following equation:
U = 0.05 = E(r) 0.5A 2 = E(r) 1.5 2
The values of E(r), given the values of 2, are therefore:

2
E(r)
0.00
0.0000 0.05000
0.05
0.0025 0.05375
0.10
0.0100 0.06500
0.15
0.0225 0.08375
0.20
0.0400 0.11000
0.25
0.0625 0.14375
7.

a.
b.

Firm-specific risk is measured by the residual standard deviation. Thus, stock A has more
firm-specific risk: 10.3% > 9.1%
Market risk is measured by beta, the slope coefficient of the regression. A has a larger beta
coefficient: 1.2 > 0.8

c.

R2 measures the fraction of total variance of return explained by the market return. As R 2 is
larger than Bs: 0.576 > 0.436
d. Rewriting the SCL equation in terms of total return (r) rather than excess return (R):
rA rf = + (rM rf ) rA = + rf (1 ) + r M
The intercept is now equal to:
+ rf (1 ) = 1 + rf (l 1.2)
Since rf = 6%, the intercept would be: 1 1.2 = 0.2%
9 a.

b. With the two scenarios equally likely, the expected return is an average of the two possible
outcomes:
E(rA ) = 0.5 (2 + 38) = 18%
E(rD ) = 0.5 (6 + 12) = 9%
c. The SML is determined by the market expected return of [0.5(25 + 5)] = 15%, with a beta of 1, and
the T-bill return of 6% with a beta of zero. See the following graph.

e.

The hurdle rate is determined by the project beta (0.3), not the firms beta. The correct
discount rate is 8.7%, the fair rate of return for stock D.