IPS: James Bond is a fifty-year old secret agent who is hoping to retire in five years. James has extravagant consumption tastes which require sizable annual capital. James earns £250,000 per year from the British government and has gold deposits throughout the world. His assets and income are sufficient to cover his living expenses. James has recently discovered that he has a sixteen-year old daughter living in Japan and he would like to begin supporting her and her mother. James was married for one day twenty years ago (his wife was brutally killed by Blofeld) and has never remarried. He has been serious, however, with one woman to whom he is considering proposing. During retirement, James would like to relocate to the US and purchase homes in Wyoming and Florida.

James has been under tremendous physical and psychological pressure during his life as a secret agent. James would also like to learn more about charity as he is interested in providing financial support to those less fortunate than he has been.

You should also be prepared for the following exam questions:

1. Show the hedging and speculative outcomes using futures contracts.

2. Show the hedging outcomes using option contracts.

3. Determine the risk and return of a multi-asset portfolio (including one with a risk-free asset).

4. Discuss diversification, standard deviation, correlation coefficient, and asset allocation.

5. Use CML and CAPM to solve problems.