Assume that stock market returns have the market index as a common factor, and that all stocks in the economy have a beta of 1.3 on the market index. firm-specific returns all have a standard deviation of 35%. suppose that an analyst studies 20 stocks and finds that one-half of them have an alpha of +1.8%, and the other half have an alpha of −1.8%. suppose the analyst invests $1.0 million in an equally weighted portfolio of the positive alpha stocks, and shorts $1 million of an equally weighted portfolio of the negative alpha stocks.

a. what is the expected profit (in dollars) and standard deviation of the analyst's profit?
b. how does standard deviation change if the analyst examines 50 stocks instead of 20 stocks?

In 2015, lori assigned a paid-up whole life insurance policy to an irrevocable life insurance trust (ilit) for the benefit of her three children. the ilit contained a crummey provision for the benefit of each child. at the time of the transfer, the whole life insurance policy was valued at $200,000, and since lori had not made any other taxable gifts during her lifetime, she did not owe any gift tax. lori died in 2016, and the face value of the whole life insurance policy of $2,000,000 was paid to the ilit. regarding this transfer, how much is included in lori’s gross estate at her death?

One of the scarce resources that constrain our behavior is time. each of us has only 24 hours in a day, and we must allocate our time in a given day among competing alternatives. how do you go about allocating your time in a given day among competing alternatives? how do you go about weighing the alternatives? once you choose a most important use of time, why do you not spend all your time on that activity? a. as more and more time is spent on one activity, the opportunity cost of that activity in terms of other activities rises. b. as less and less time is spent on one activity, the opportunity cost of that activity in terms of other activities rises. c. as more and more time is spent on one activity, the opportunity cost of that activity in terms of other activities falls. d. b and c only.

Which of the following statements accurately describes how costs and benefits are calculated? a. cost-benefit analysis is an attempt to get benefits to exceed costs. b. money is an important cost but not the only one. c. benefits do not always increase as costs increase. d. calculations of cost and benefit are based on personal preferences.