**Spreadsheet provided just needs the formulas added.
The Jones Family Incorporated
The Scene: It is early evening in the summer of 2018, in an ordinary family room in Manhattan.
Modern furniture, with old copies of The Wall Street Journal and the Financial Times, scattered around. Autographed photos of Jerome Powell and George Soros are prominently displayed.
A picture window reveals a distant view of lights on the Hudson River. John Jones sits at a com-
puter terminal, glumly sipping a glass of chardonnay and putting on carry trade in Japanese yen
over the Internet. His wife Marsha enters.
Marsha: Hi, honey. Glad to be home. Lousy day on the trading floor, though. Dullsville. No vol-
ume. But I did manage to hedge next year’s production from our copper mine. I couldn’t get a
good quote on the right package of futures contracts, so I arranged a commodity swap.
John doesn’t reply.
Marsha: John, what’s wrong? Have you been selling yen again? That’s been a losing trade for
John: Well, yes. I shouldn’t have gone to Goldman Sachs’s foreign exchange brunch. But I’ve
got to get out of the house somehow. I’m cooped up here all day calculating covariances and
efficient risk-return trade-offs while you’re out trading commodity futures. You get all the
glamour and excitement.
Marsha: Don’t worry, dear, it will be over soon. We only recalculate our most efficient common
stock portfolio once a quarter. Then you can go back to leveraged leases.
John: You trade, and I do all the worrying. Now there’s a rumor that our leasing company is going
to get a hostile takeover bid. I knew the debt ratio was too low, and you forgot to put on the
poison pill. And now you’ve made a negative-NPV investment!
Marsha: What investment?
John: That wildcat oil well. Another well in that old Sourdough field. It’s going to cost $5 million!
Is there any oil down there?