## Assignment 3

BUSI 721

Data Driven Finance I

Jones Graduate School of Business

Rice University

Submit a Jupyter notebook. Copy each question into a Markdown cell and provide your answer in the cell or cells below it.

I have a $50,000 portfolio. I am considering levering it – borrowing $25,000 to increase the investment to $75,000. I can borrow at 5%. What will be my gain or loss in a year if the unlevered investment earns 10%? What if it loses 10%?

I think CVX will beat XOM. I am considering investing $10,000, buying $10,000 of CVX, and shorting $10,000 of XOM. I will earn negligible interest on the short sale proceeds. What will be my gain or loss if CVX earns 12% and XOM earns 5%? What if the reverse happens?

SKIP QUESTION 3

A 6% coupon bond makes semi-annual coupon payments (3% each six months). It has 10 years to maturity, and the next coupon payment is six months away. Its current yield is 8%. What is its price?