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RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024 - DUE 15 August 2024 $2.65   Add to cart

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RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024 - DUE 15 August 2024

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RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024 - DUE 15 August 2024 ; 100% TRUSTED Complete, trusted solutions and explanations. For assistance, Whats-App Question 1 (25 marks) 1.1 A bank estimates that its profit next year is normally distributed with a mean of 0.8% of assets and a standard deviat...

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  • August 9, 2024
  • 15
  • 2024/2025
  • Exam (elaborations)
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THIS DOCUMENT
CONTAINS ANSWERS,
WORKINGS AND
SOLUTION TO THE
QUESTIONS BELOW



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, RSK4805 Assignment 3 (COMPLETE ANSWERS) 2024
- DUE 15 August 2024 ; 100% TRUSTED Complete,
trusted solutions and explanations. For assistance,
Whats-App




Question 1 (25 marks)


1.1 A bank estimates that its profit next year is normally
distributed with a mean of 0.8% of assets and a standard
deviation of 2% of assets. How much equity (as a percentage of
assets) does the company need to be 99% sure that it will have
positive equity at the end of the year? (Use z-values rounded to
two decimal places) (2)


1.2 Given the following information for a listed company, the
expected return if invested in the shares of this company is
7.80%. Calculate the variance and the standard deviation of this
expected return. (3) State of Economy Probability Percentage
Return State 1 0.30 13% State 2 0.35 8% State 3 0.15 2% State 4
0.20 4%


1.3 Describe an exchange-traded fund (ETF) and identify an
advantage of an ETF compared to a closed-end fund (CEF). (2)


1.4 Suppose you currently hold a security valued at R750, and the
prevailing risk-free rate is 5.5%. You plan to sell this security in
three months. The theoretical forward contract price is calculated

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