1BFF2701 Equity Markets Tutorial 8 Questions Question 1 (Teall (2018) Q6.2) Suggested solution: Question 2 (Teall (2018) Q6.3) The following table represents outcome numbers, probabilities, and associated returns for Stock A:

2a)What is the probability associated with outcome 9? b)What is the standard deviation of returns associated with Stock A? Suggested solution: Question 3 (Teall (2018) Q6.4) Suggested solution:

3Question 4 (Teall (2018) Q6.5) What would each of the probabilities in Question 3 be if Nettles Company management were certain enough of its forecast to associate a 5% standard deviation with its return projection? Suggested solution: Reduce the standard deviations in the z scores in question 3 to 0.05 Question 5 (Teall (2018) Q6.6) The following table presents sample daily historical price data for a stock whose returns are given in the third column. TimePricetReturnt030N.A.130.1250.004167230.250.004149330.125-0.004134320.0622415340.0625631-0.088247320.032258830.5-0.04688930.750.0081971030.8750.00406511310.0040491230.875-0.0040313310.0040491431.1250.0040321530.25-0.02811 TimePricetReturn t 16330.090909 1730-0.09091 1835.1250.170833 1933-0.0605 2032.125-0.02652 2132.250.003891 2232.3750.003876 2332.125-0.00772 2432.250.003891 2534.250.062016 2636.3750.062044 2738.50.058419 2834.375-0.10714 2933.875-0.01455 3033.625-0.00738 a.Based on a traditional sample estimator, calculate a daily variance estimator for this stock. b.What would be the Parkinson extreme value estimated daily returns variance for this stock? Suggested solution:

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