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Answer the following question regarding the podcasts (3 points) As we have seen with discussions with Dan Sundheim, Cliff Asness, and HRT, we see a major advancement in the use of AI in trading. Describe what AI is best at handling in terms of trading (what type of trading) and where human beings can survive as traders (what type of role)?

We live in a world where there are many risky assets and a risk free asset. Describe the efficient frontier on the mean standard deviation graph – what does it mean to be on the efficient frontier. Explain in detail how each point on the efficient frontier is constructed (i.e. if you told Excel Solver to construct the EF for you, what is it doing behind the scenes to construct the curve). (4 points)

Ray Dalio’s main reason to dislike the pod shop method of structuring a hedge fund is because:

Extra Credit (2 points): Explain what Cliff Asness thinks about how Momentum in prices can make markets both more efficient and less efficient?

Which of the following is NOT true about Excel data work

3. You are an investor who has been looking closely at IBM over the past 2 months.  The current stock price sits at 50, and all options that are currently traded are at the money.  You say to yourself: “With the upcoming IBM earnings report, I am pretty sure that IBM is going to match earnings exactly or close to it.  I don’t know which direction it will move, but whichever direction it moves it will just be a very small move (low volatility).”  You have available to you a put, a call, and obviously the stock itself if you want.  Given this feeling, what position would you construct (i.e. combine the options in some way to match your sentiment) to perfectly capture this idea that there will be low volatility (without any directional bias)?  You can go long, short, buy an option, or sell/write an option if you want.  Describe your position below. Draw the profit diagram to your constructed position as well (assume that a put costs P dollars and a call costs C dollars).  What is this position called which you have constructed (i.e the name given to it)? (5 points)   b) Referring to the previous question, draw the profit diagram of the market maker who is on the opposite side of this transaction (i.e the one who took the exact opposite position as you and created the options)?     (1 point bonus) Fill in the blank: Combining the two profit diagrams together highlights that the options market is a ________________.

If the simple CAPM is valid, is the situation detailed below possible? Explain in a few short sentences.  (4 points)   Portfolio                                              Expected Return                                             Std Dev Risk-free                                             10                                                                    0% Market                                                30%                                                                 28% A                                                         22%                                                                 20% _________________________________________________________________________ 

If the simple CAPM is valid, is the situation detailed below possible? Explain in a few short sentences.  (4 points)   Portfolio                                              Expected Return                                             Beta Risk-free                                             10                                                                    0 Market                                                18%                                                                 1 A                                                         24%                                                                 1.25 B                                                         26%                                                                 2 ______________________________________________________________________ 

It is important to keep your intake of cholesterol to 10 percent of daily total calories.

Coconut oil, palm kernel oil, and palm oils are saturated fats which are semi-solid at room temperature and their intake should be minimized.