You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to CAPM?
Q: In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a broadbased…
A:
Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Suppose you have a project that has a 0.4 chance of tripling your investment in a year and a 0.6…
A: Answer 1. For simple purposes, let the investment amount be x equal to $1. Expected Value:…
Q: You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of…
A: Expected Return of Equity = E(Ri) = Rf + ß * (Rm – Rf)
Q: You are an analyst for a large public pension fund and you have been assigned the task of evaluating…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Calculate Kish's required rate of return. Do not round intermediate calculations. Round your answer…
A: Beta is a measure of a security's or portfolio's volatility (or systematic risk) in comparison to…
Q: Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required…
A: A portfolio comprises of different securities, funds, assets and derivates which are purchased by…
Q: The Blackwell mutual fund has a stock portfolio that are consists of the following companies. Stock…
A: Beta It helps to measure the stock volatility related to an overall market. It is computed in order…
Q: mutual fund manager has a $20 million portfolio with a beta of 2.8. The risk-free rate is 2.5%, and…
A: We need to use CAPM equation to calculate beta value. The equation is Required return =risk free…
Q: Suppose you owned a portfolio consisting of $250,000 of long-term U.S. government bonds. Would your…
A: Portfolio risk-less: The portfolio is not risk-less. It might be free of liquidity risk and…
Q: You manage an equity fund with an expected risk premium of 14% and a standard deviation of 54%. The…
A: The expected return is the minimum required rate of return which an investor required from the…
Q: You are managing a fund with an expected rate of return of 15% and a standard deviation of 27%. The…
A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: To create a delta-neutral portfolio, the SIT fund has sold 10,000 put options on Epsilon stock with…
A: Black Scholes Model is one of the model which is based on mathematical derivation so that prices of…
Q: You are a portfolio manager of a global equity fund of funds UITF. You decided to hold a portfolio…
A: Here, Proportion invested in S&P Index (Ws) is 80% Proportion invested in Blackrock Index (Wb)…
Q: You are considering investing $1,000 in a complete portfolio. The complete portfolio is composed of…
A: An investment is refer as an asset purchased with intention to earn income at some time in future.…
Q: A mutual fund manager has a $20 million portfolio with a beta of 1.7.The risk-free rate is 4.5%, and…
A: CAPM (capital asset pricing model) equation is useful to find the required return of a…
Q: Assume that you manage a $12.00 million mutual fund that has a beta of 1.15 and a 9.70% required…
A: Required return = Rf + Beta (Rm- Rf) Where, Rf = Risk free return Rm = Market return 9.70 = 2.2 +…
Q: Curious George, a mutual fund manager, has a P40 million portfoio with a beta of 1.00. The risk-free…
A: The beta of a portfolio is the weighted sum of the individual asset betas.
Q: . a. A mutual fund with beta of .8 has an expected rate of return of 14%. If rf = 5%, and you expect…
A: The question is based on the concept of capital asset pricing model (CAPM) , the model used to…
Q: As an equity analyst, you have developed the following return forecasts and risk estimates for two…
A: a.Calculation of Expected Returns according to CAPM:
Q: A mutual fund company has cash resources of birr 200 million for investment in a diversified…
A: Linear programming (LP) model is a mathematical modelling technique used to help decision makers in…
Q: Calculate the required rate of return for the Wagner Assets Management Group, which holds 4 stocks.…
A: The question is based on the concept of portfolio return by use of capital asset pricing model.…
Q: You manage an equity fund with an expected risk premium of 10% and an expected standard deviation of…
A: Expected Risk Premium is 10% Expected Standard Deviation is 14% Rate on Treasury bills is 6%…
Q: Assume that you are the portfolio manager of the Forestie Fund, a $3 million hedge fund that…
A: Given, The investment is $3 million. The risk free rate is 5%. The return on market is 11%.
Q: Bulldogs Inc. has an investment fund amounting to P4,500,000. The portfolio consists of three stocks…
A: Portfolio beta = weighted sum of the individual asset betas. So we will first of all have to compute…
Q: You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of 37%.…
A: A mixture of different kinds of funds and securities for the investment is term as the portfolio.
Q: Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the…
A: Calculating beta of portfolio Beta of portfolio is weighted average beta of individual beta's
Q: Assume that you are the portfolio manager of the SF Fund, a $3 million hedge fund that contains the…
A: The Capital Asset Pricing Model would be providing the required rate of return for the portfolio…
Q: 1. What is the required rate of return on the initial P20M investment? 2. What is the rate of…
A: Formula used is as follows: Required rate of return = Rf + Beta * (Rm - Rf)
Q: In addition to risk-free securities, you are currently invested in the Tanglewood Fund, a…
A: The computation of the required return is done as:
Q: Curious George, a mutual fund manager, has a P40 million portfoilio with a beta of 1.00. The…
A: Beta is a financial metric which is used to measure the volatility of a stock. Beta measures the…
Q: As an equity analyst, you have developed the following return forecasts and risk estimates for two…
A: Financial statements are statements which states the business activities performed by the company .…
Q: Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required…
A: Given: Particulars Old value New value Investment value $10,000,000 $11,500,000 Beta 1.05…
Q: The Closed Fund is a closed-end investment company with a portfolio currently worth $245 million. It…
A: NAV of the fund = (Portfolio Value - Liabilities) / No. of shares outstanding
Q: You plan to invest in the Kish Hedge Fund, which has totalcapital of $500 million invested in five…
A: workings:
Q: What are the proportions of stocks A, B, and C, respectively, in Bo's complete portfolio?
A: Option D is correct. 32%,20%,28%
Q: The portfolio manager of the TTY Fund, a $5 million hedge fund that contains the following stocks.…
A: The first step is to calculate the weight of each stock in the portfolio
Q: A pension fund manager is considering three assets. The first is a stock fund, the second is a…
A: Expected return of a portfolio is measured by multiplying the standard variation of each security by…
Q: A pension fund is investing $60 million in a well-diversified equity portfolio E and $30 million in…
A: Once the fund has made the new investment, the portfolio value = E + B + C = 60 + 30 + 10 = 100 The…
Q: HLCM and PHN has a beta of 1.50 and 2, respectively. The average return on the market is 9.50% and…
A: Portfolio Beta is Weighted Average Beta. Total investment of the Portfolio. = P4,500,000…
Q: You plan to invest in the Kish Hedge Fund, which has total capital of $500 million invested in five…
A: The security market line (SML) is a graphical representation of the capital asset pricing model that…
Q: What is the equation for the Security Market Line (SML)? (Hint: First determine the expected market…
A: Given, Risk free rate = 4% Calculation of expected market return The formula to calculate expected…
Q: Suppose you are the money manager of a $4 million investment fund. The fund consists of four stocks…
A: Value of investment fund = $4,000,000 Stock Investment Beta Weighted beta A B C=B*(A/4,000,000)…
Q: mutual fund manager has a $20 million portfolio with a beta of 1.7. The risk-free rate is 4.5%, and…
A: Portfolio Beta New Required return = Risk free return × portfolio beta( Market return - Risk free…
You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, Risk-free rate is 1.3%. What is the expected return of this portfolio according to
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
- You create a portfolio consisting of $23000 invested in a mutual fund with beta of 1.3, $25000 invested in Treasury Securities (assume risk-free), and $12000 invested in an index fund tracking the market. According to surveys, the expected market risk premium is 6.6%, risk free rate is 1.3%. What is the expected return of this portfolio according to CAPM? Answer in percent, rounded to one decimal place.As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 f the risk-free rate (RFR) is 3.9% and the expected market risk premium (i.e., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ.As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 If the risk-free rate (RFR) is 3.9% and the expected market risk premium (ie., E(Ra) – RFR) is 6.1%, calculate the expected return for each mutual fund according to the 3.а. САРМ. 3.b. Decide which fund is overvalued, undervalued or properly valued and explain why?
- As an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U): Fund T Fund U Forecasted Return 9.0% 10.0 CAPM Beta 1.20 0.80 a) If the risk-free rate is 3.9 % and the expected market risk premium is 6.1%, calculate the expected return for each mutual fund according to the CAPM. b) Using the estimated expected returns from Part a along with your own return forecasts, explain whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. Are Funds T and U overvalued, undervalued, or properly valued?The following data are available to you as portfolio manager: Security Estimated return (%) Beta A 40 3.0 B 35 2.5 C 30 1.0 D 17.5 1.8 E 20.0 1.5 Market Index 25 2.0 Government Security 17 0 In terms of the security market line, which of the securities listed above are underpriced? Assuming that a portfolio is constructed using equal proportions of the five securities listed above, calculate the expected return and risk of such a portfolioAs an equity analyst, you have developed the following return forecasts and risk estimates for two different stock mutual funds (Fund T and Fund U}: Forecasted Return CAPM Beta Fund T 9.00% 1.20 Fund U 10.00% 0.80 a. If the risk-free rate is 3.9 percent and the expected market risk premium (£(RM) -RFR} is 6.1 percent, calculate the expected return for each mutual fund according to the CAPM. b. Using the estimated expected returns from part (a) along with your own return forecasts, demonstrate whether Fund T and Fund U are currently priced to fall directly on the security market line (SML), above the SML, or below the SML. c. According to your analysis, are Funds T and U overvalued, undervalued, or properly valued?
- Assume you wish to hold a portfolio consisting of Loblaw stock and a riskless asset. Given the following information, calculate portfolio expected returns and portfolio betas, letting the proportion of funds invested in Loblaw range from 0 to 125% Loblaw has a beta (\ beta) of 1.2 and an expected return of 18% Risk-free rate is 7%. Loblaw weights: 0%, 25%, 50%, 75%, 100%Consider a portfolio consisting of the below securities with the below characteristics: Security Amount Invested($) Beta Expected Return A 1,5 MIL 1.0 12.0%B 1.0 MIL 1.5 13.5%C 2.0 MIL 0.8 9.0% Required:a) Calculate the portfolio’s Beta. b) Calculate the portfolio’s expected return. c) Discuss the Capital Asset Pricing Model (CAPM) explaining what it is used forand which are its limitations.A portfolio consists of assets with the following expected returns (refer to image): a. What is the expected return on the portfolio if the investor spends an equal amount on each asset? b. What is the expected return on the portfolio if the investor puts 50 percent of available funds in technology stocks, 10 percent in pharmaceutical stocks, 24 percent in utility stocks, and 16 percent in the savings account?
- Suppose you form a portfolio consisting of $31,000 invested in a mutual fund with beta of 1.6, $18,000 invested in Treasury securities $19,000 invested in an index fund with the same beta as the entire market. Expected market risk premium is 6.3%. Risk-free rate is 0.8% What is the exped return of this portfolio according to the CAPM? O a. 6.9% Ob. 6.6% O c. 7.2% d. 9.1% e. 5.8%An investor invests 30% of his funds in risk free asset and the remaining 70% of funds in an index fund that represents the market. The risk-free return is 8%. The index fund is expected to give a return of 21%. Using the CAPM Model. a. What is the expected return from the portfolio of the investor? The standard deviation of returns from the index funds is 9.80. What is the Standard Deviation of the portfolio return? b. If the investor withdraws his investment in the risk free security and invests the same also in the index fund, what is the expected return? What is the portfolio risk?You estimate that a passive portfolio, that is, one invested in a risky portfolio that mimics the S&P 500 stock index, yields an expected rate of return of 13% with a standard deviation of 25%. You manage an active portfolio with expected return 18% and standard deviation 28%. The risk-free rate is 8%. i) Draw the CML and your funds' CAL on an expected return-standard deviation diagram. ii) What is the slope of the CML? iii) Characterize in one short paragraph the advantage of your fund over the passive fund.