Homework for Week 3
Math 408 Section A, January 21, 2004>
-
Reading Assignment:
- Investment Science: Due Friday, January 16.
- Lecture notes on Bond Basics: Fixed Income Securities
Due Wednesday, January 21.
- Investment Science: Due Friday, January 23.
- Portfolio Modeling Using LPs : Due Friday, January 23.
- Linear Programming Primer : Due Monday, January 26.
- Multivariable Calculus Review: Due Wednesday, January 28.
-
Homework Assignment:
- Investment Science: Ch.3, Problems 1-6, 8, 11, 12, 16.
- Investment Science: Ch.5, Problems 1-4.
- LP Primer:
- Be able to solve a 2 variable LP graphically.
- Be able to state and prove the Weak Duality Theorem for
LPs in standard form.
- Be able to transform any LP to one in standard form.
- Linear Programming Duality:
- Be able to state the Strong Duality Theorem for
LPs in standard form.
- LP Modeling:
- Be able to model the modeling problems
1, 2, 3, 4, and 5 as LPs.
-
Vocabulary List:
- Investment Science: Ch.3
- securities
- fixed income security
- Bonds
- coupon payment
- face value
- time to maturity
- zero coupon bond
- date of maturity
- yield to maturity
- the bond price formula
- par
- price-yield curve
- interest rate risk
- bond duration and modified duration
- Price sensitivity formula
- price and duration of a bond portfolio
- immunization of bond portfolios
- Linear Programming Duality
- LP Standard form
- Weak Duality Theorem
- Strong Duality Theorem
Key Concepts:
- Investment Science: Ch.3
- fixed income security
- bond pricing and duration
- LP Primer and LP Duality
- linear programming
- LP modeling
- LP duality
Skills to Master:
- applying formulas for compound interest, present value, bond
pricing, and duration
- modeling LPs
- putting and LP in standard form
- solving LPs in 2 variables
- computing duals to LPs
Quiz:
- This quiz is based on the vocabulary words and homework
for Chapter 3 of Investment Science.
The quiz will consist of two questions. The first will be taken from
the vocabulary list for Chapter 3 of Investment Science,
and the second will computational in nature and similar to the homework
problems assigned from Chapter 3 of Investment Science.