PDA

View Full Version : Ethanol question (#12)


Mr. BoH
05-20-2008, 05:02 PM
Anybody know how to do part B here? It seems like there is a piece of information missing. All you know is that the return on MPG "depends on" gas price, corn price, and Russell 2000 performance. Wouldn't you have to know something about how important each factor is relative to the other?

Or am I totally missing something?

namssa
05-20-2008, 05:14 PM
Anybody know how to do part B here? It seems like there is a piece of information missing. All you know is that the return on MPG "depends on" gas price, corn price, and Russell 2000 performance. Wouldn't you have to know something about how important each factor is relative to the other?

Or am I totally missing something?

My thoughts exactly. I didn't think that we had enough information, so I left it blank.

remilard
05-20-2008, 05:28 PM
Anybody know how to do part B here? It seems like there is a piece of information missing. All you know is that the return on MPG "depends on" gas price, corn price, and Russell 2000 performance. Wouldn't you have to know something about how important each factor is relative to the other?

Or am I totally missing something?

I wrote down that I assumed it was a weighted average and calculated that, that cannot have been right though. Maybe I got a tiny bit of credit though.

TiderInsider
05-20-2008, 05:32 PM
I wrote down that I assumed it was a weighted average and calculated that, that cannot have been right though. Maybe I got a tiny bit of credit though.I think I just used the market price of risk in the previous question and backed into the expected return.

Laurelinda
05-20-2008, 06:12 PM
I wrote down that I assumed it was a weighted average and calculated that, that cannot have been right though. Maybe I got a tiny bit of credit though.

My answer was somewhat lamer. I said, "The return on MPG stock can be derived from the market price of risk of MPG stock, which is the same as the market price of risk for all securities that depend only on the price of gas, the price of corn, and the Russell 2000."

Or something like that.

Car'a'carn
05-20-2008, 06:39 PM
I think I just used the market price of risk in the previous question and backed into the expected return.

That's what I did too.

Laurelinda
05-20-2008, 06:46 PM
That's what I did too.

I'm confused--wouldn't that give you the expected return on gasoline, not MPG stock?

Car'a'carn
05-20-2008, 06:49 PM
Sorry I did not check the problem, before I posted. What I used the index data :shrug:. Could not think of anything else.

hamstrman
05-20-2008, 07:23 PM
I think I summed up the market price of risk for all three variables and added it to the risk free rate...